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Clear Thinking Group Predicts Rise In Holiday Sales

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Holiday Sales Will Rise, But Challenges Lie Ahead: Clear Thinking Group Predicts 4.5% Increase vs. 6+% Last Year This holiday season will bring some good tidings for merchants, but retail sales are forecast to increase by just 4.5% over 2005 levels, according to Clear Thinking Group, LLC, a retailing/consumer products and industrial manufacturing consultancy headquartered here. “While we will still see growth, this holiday season will not be as robust as last year, when we saw sales gains of more than 6% over figures for the same period in 2004,” said Lee A. Diercks, a partner and managing director in the firm. Diercks attributed the change in part to oil prices, which are approximately 20% to 25% higher than they were during the same period in 2005. “These prices continue to hit consumers in the wallet at the gas pumps, as well as at home with higher heating costs,” he noted. Housing market slowdowns are also sparking a tendency among some consumers to curb holiday spending, Diercks observed, as the value of homes has fallen in many parts of the country. Other issues seen having an impact at the retail sales counter include higher interest rates on credit card debt and variable mortgages, as well as steep price declines on certain electronic items. “The price of flat screen TV’s, laptop computers, cell phones, digital cameras, home entertainment systems, DVD players and the like have fallen pretty far, requiring retailers to sell significantly more units to even match last year’s sales levels,” Diercks explained. Clear Thinking Group believes shoppers will purchase fewer big-ticket items this year and instead focus on buying less expensive gifts in larger quantities. “We see Christmas stockings being full, but with smaller, less pricey gifts and more of those than in the past,” Diercks noted, pointing out that the lack of a “hot” category or item this season should also fuel the popularity of such modest gifts. “In 2005, for example, many consumers went crazy for the i-Pod,” he said. “However, there is no comparable ‘must-buy’ in 2006.” While holiday sales will increase overall, the firm foresees particularly favorable results for retailers who offer “great gift values” combined with exemplary customer service and convenience. In terms of merchandise categories, the firm sees fashion footwear, fashion accessories, fragrances, personal care items, books and gift cards as ranking among the ‘winning categories,’ while home improvement products, home furnishings, high-end electronics, sporting goods and toys should see weakness. “Home and electronics retailers, such as Home Depot, Lowe’s, Bombay Company, Pier 1, and Best Buy will have a tougher time this holiday season compared to last year,” Diercks said. “In the apparel market, we see department stores performing better than specialty apparel stores. Target and Wal-Mart will experience holiday sales increases, but we expect their growth rates to fall short of the respective 4.7% and 1.9% same-store gains posted in December 2005.” Further, a recent informal survey of retailers conducted by the firm demonstrates that merchants are indeed taking a cautious approach to holiday sales, instead concentrating on efforts to control their inventory levels. “Given this pattern,” Diercks advised, “consumers would do best to shop early, as some items may sell out prior to the last days of the shopping season.” About Clear Thinking Group Clear Thinking Group provides a wide range of strategic consulting services to retail companies, consumer product manufacturers/distributors and industrial companies. The national advisory organization specializes in assisting small- to mid-sized companies during times of growth, opportunity, strategic change, acquisition, and crisis. For further information, visit the firm’s website at www.clearthinkinggrp.com.

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