Cash Registers Will Ring In Holiday Cheer: Ernst & Young Forecast



    Sales Set To Jump Despite Dollar Parity

    TORONTO, Nov. 1 /CNW/ - Despite continued speculation on how the
weakening U.S. dollar will affect the Canadian economy, retailers here should
expect a healthy 4.5 to 5.5 percent increase in holiday sales compared to last
year, says Ernst & Young. The forecast covers the months of November, December
and January.
    "American retailers close to the border are marketing to Canadian
consumers, and shoppers might be tempted to head South," explains Daniel A.
Baer, Partner, Ernst & Young. "But we still foresee fairly strong overall
growth in Canadian sales, and certain niches will see significant gains."
    For instance, large toy recalls in recent months mean consumers are
likely to buy more Canadian- and American-made toys, even though they are more
expensive than Chinese imports.
    "Dollar parity or supremacy means retailers may need to employ a
different marketing approach this holiday season," Baer notes. "Canadian
retailers are already announcing price cuts to stimulate sales. They will also
ramp up promotional efforts to encourage shoppers to buy locally. This will
speed up as the benefits of the Canadian dollar's rise work their way through
the supply chain."
    The healthy Canadian economy is clearly having a positive effect on the
retail landscape. Per capita income here is increasing, and unemployment is at
a 35-year low. Recent cuts to the GST and income taxes (although not fully
effective until January 2008) will boost consumer confidence and help
shoppers, particularly those looking to exchange gift cards in the New Year.
The January implementation of the GST cut may, however, delay "big ticket"
purchases, such as appliances and cars.
    Baer expects to see sales numbers differ from one Canadian region to the
next. Calgary and Vancouver are again expected to lead the country in holiday
retail spending. This trend is fuelled by strong oil prices and pre-Olympics
spending. Baer predicts Montreal and Toronto will be closer to the national
average.
    In 2006, Canadian sales (excluding automotive) totalled $65.3 billion for
November, December and January. This represented a 4.7 percent increase over
2005 results for the same period.

    
    Hot Categories and Products to Watch this Year:

    -   Consumers will likely continue to spend on electronics at the expense
        of apparel, although both categories will see deflating prices.
        Consumer electronics will be the most popular category for gift
        purchases.
    -   The fastest growing category in the sports market is apparel. This is
        fuelled by a growing trend in active-wear, which is now considered
        both fashionable and practical.

    Shopping Trends from the 2007 Holiday Forecast:

    -   Internet shopping is growing fast. Retailers continue to improve
        websites, making them more user-friendly and visually attractive. The
        practice of buying online and picking up at the closest store ("site
        to store") is also growing in popularity.
    -   Consumers do not stop shopping in poor weather during the holiday
        season; they now can shop via the Internet. If the weather is warm,
        seasonal clothing will suffer at the expense of consumer electronics
        and other non-seasonal merchandise. If the weather is colder, apparel
        will get the sales at the expense of non-seasonal merchandise.
    -   Gift cards are expected to reach an all-time high. Based on U.S.
        experience, about 56% of gift cards are redeemed within the first
        month of purchase and 85% of all cards are redeemed within 3 months.
    -   Gift cards will be increasingly popular as gifts for teens and young
        adults. Creative promotions related to gift cards will continue
        because gift card shoppers are generally not as price sensitive as
        other consumers. Retailers will continue to stock their stores past
        Christmas with full-priced merchandise to match gift card
        redemptions.
    

    About the Ernst & Young 2007 Holiday Sales Forecast

    The Holiday Sales Forecast by Ernst & Young is based on U.S. and Canadian
current market indicators and data, including stock market performance,
consumer confidence, unemployment rates and historical relationships between
retailers and customers. The retail outlook further takes into account big box
and department stores, speciality and luxury retailers, online sales, the
season's "hot items," trends in major merchandise categories, distribution
cost fluctuations and regional shopping trends.

    About Ernst & Young

    Ernst & Young, a global leader in professional services, is committed to
restoring the public's trust in professional services firms and in the quality
of financial reporting. Its 114,000 people in 140 countries pursue the highest
levels of integrity, quality and professionalism in providing a range of
sophisticated services centred on our core competencies of auditing,
accounting, tax and transactions. Further information about Ernst & Young and
its approach to a variety of business issues can be found at
ey.com/perspectives. Ernst & Young refers to the global organization of member
firms of Ernst & Young Global Limited, each of which is a separate legal
entity. Ernst & Young Global Limited does not provide services to clients.





For further information:

For further information: to speak to Daniel Baer, please contact: Megan
Bailey at (403) 206-5037 or megan.bailey@ca.ey.com; or Amanda Olliver at (514)
874-4308 or amanda.olliver@ca.ey.com; or Kelly Peace at (416) 943-3662 or
kelly.peace@ca.ey.com


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