Slow Holiday Sales Lead to Cautious Retail Forecasts

LANSING, MI--(Marketwire - January 23, 2008) - Michigan retailers are cautious in their projections for 1st Quarter sales, following a disappointing holiday season, according to the Michigan Retail Index, a joint project of Michigan Retailers Association and the Federal Reserve Bank of Chicago.

Although the overall retail industry's three-month outlook remains positive, the level of optimism is at its lowest point in seven years.

Holiday sales were disappointing for the majority of retailers, who went into the season expecting, on average, a 2.2 percent gain. However, only 34.5 percent increased sales, while 49.1 percent experienced declines and another 16.4 percent reported no change.

On a more positive note, nearly a fifth of the industry -- 19.7 percent -- rang up holiday sales increases greater than 5 percent, while another 14.8 percent recorded gains of 0.1-5 percent.

"Retailers expected a tough season, and it was," said James P. Hallan, MRA president and CEO. "Given the many economic challenges facing retailers, it's remarkable that half of them did as well or better than the previous year."

"As policymakers consider actions to stimulate the national and state economies, they must focus on plans to boost consumer spending and increase retail activity," he added.

Sales for all of 2007 appeared slightly better than the holiday figures. The Index found 48.5 percent posted better sales than the previous year; 51.5 percent had lower sales.

For December, the Index showed 30 percent of retailers increased sales over the same month last year, while 54 percent recorded declines and 14 percent saw no change. The results create a seasonally adjusted performance index of 38.5, down from 48.1 in November.

In addition, 36 percent believe their sales will increase for January-March, while 36 percent forecast declines and 23 percent project no change. The results create a seasonally adjusted outlook index of 55.5, down from 56.0 in November.

Note: William Strauss, Senior Economist and Economic Advisor with the Federal Reserve Bank of Chicago, can be reached at 312.322.8151.

Michigan Retailers Association/Federal Reserve Bank of Chicago

Michigan Retail Index

December 2007 results

Index figures dating to July 1994 are available at www.retailers.com/news/retailindex.html

December Performance

Retailers reporting increased, decreased or unchanged sales, inventory, prices, promotions and hiring compared to the same month a year ago

(numbers in parentheses indicate November results)

            % Increased   % Decreased   % No Change  Index*       Responses
Sales       30 (42)       54 (44)       14 (13)      38.5 (48.1)  120 (106)
Inventory   28 (38)       35 (21)       32 (36)      55.3 (60.8)  117 (102)
Prices      45 (39)       8  ( 3)       43 (55)      66.6 (69.8)  118 (104)
Promotions  38 (47)       6  ( 5)       51 (44)      61.7 (68.6)  117 (103)
Hiring       6 ( 9)       15 ( 9)       68 (78)      40.2 (48.9)  109 (103)

Outlook for Next 3 Months

Retailers expecting increased, decreased or unchanged sales, inventory, prices, promotions and hiring compared to the same period a year ago

(numbers in parentheses indicate November results)

            % Increased   % Decreased   % No Change  Index*       Responses
Sales       36 (37)       36 (39)       23 (23)      55.5 (56.0)  117 (106)
Inventory   22 (19)       41 (43)       30 (33)      42.3 (45.4)  114 (102)
Prices      45 (42)        9 ( 6)       38 (47)      65.9 (66.2)  113 (102)
Promotions  33 (36)        9 (13)       51 (44)      63.7 (63.9)  114 (100)
Hiring       5 ( 3)       15 (14)       70 (75)      44.5 (44.1)  111 ( 99)

December Sales Performance & Outlook for Next 3 Months, by Region

(the first number indicates sales performance for the month; the number in parentheses indicates outlook for the next three months)

                % Increased     % Decreased     % No Change
North           12 (24)         76 (52)         12 (20)
West            52 (38)         33 (24)         10 (33)
Central         24 (35)         35 (24)         41 (35)
East            36 (57)         57 (36)          7 ( 7)
Southeast       33 (37)         57 (42)         10 (18)

Question of the Month

For sales this past holiday season, what was the percentage increase or decrease from the previous season?

< -5%           -5... < 0%      0%              0 > ...+5%      > +5%
31.1%           18.0%           16.4%           14.8%           19.7%

For sales for all of 2007, what was the percentage increase or decrease from the previous year?

< -5%           -5... < 0%      0%              0 > ...+5%      > +5%
27.3%           24.2%           0%              14.2%           34.3%

*Seasonally adjusted diffusion index. A diffusion index, which is the sum of the percent of respondents indicating increase and half the percent indicating no change, is calculated and then seasonally adjusted using the U.S. Census Bureau's X-11 Seasonal Adjustment procedure. Index values above 50 generally indicate an increase in activity, while values below 50 indicate a decrease.

Contact Information: Contact: Tom Scott 517.372.5656