The NRF projects 4% to 6% growth in 2023 as pre-pandemic retail trends re-emerge

The National Retail Federation (NRF) released its annual sales forecast was during its third annual State of Retail & the Consumer virtual conversation.

“In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” NRF President and CEO Matthew Shay said. “While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels.”

Overall, the NRF Forecasts 2023 Retail Sales to Grow Between 4% and 6%.  This year’s projection compares with 7% annual growth to $4.9 trillion in 2022 but is above the pre-pandemic average industry sales growth rate of 3.6%.

The NRF’s Chief Economist Jack Kleinhenz noted “while it is still too early to know the full effects of the banking industry turmoil, consumer spending is looking quite good for the first quarter of 2023” and that economic activity has remained strong even as monetary policy has become more restrictive.

The macro-economic backdrop will certainly have a big influence on retail’s overall sales growth especially if pressures on the consumer slow spending in the second half of the year.

One always interesting wild card that Planalytics is watching is the weather.  Of all the external factors out there that impact sales, no other variable has the ability to shift sales as frequently, immediately, and meaningfully as changes in the weather.

Weather-Driven Demand (WDD) is a metric Planalytics calculates for retailers to quantify how much the weather alone increases or decreases traffic levels or demand for certain categories and products. Here are a couple of important periods – and resulting opportunities and risks – to monitor when it comes to weather-driven consumer demand trends in 2023:

• Many retailers have endured a slow start to the spring selling season due to a less favorable weather environment in March. Categories including sandals, shorts, lawn care, bikes & accessories, suncare, and grilling have all seen negative WDD (-3% to -10%) nationally compared to the prior year.  The upcoming post-Easter period will be critical to making up for slow sales to start the season. WDD projections point to a positive sales trend that will help retailers begin to move through inventory in the coming weeks.  This is important because strong May comps await many retailers. Nationally, May 2022 was the hottest since 2018, with the warmest anomalies in the eastern half of the country. Matching LY sales levels could be challenging if the weather is helpful and retailers must consider taking heavier markdowns as the season winds down.
• Look for a stronger start to the fall selling season. September 2022 was hottest in the past 60+ for North America, driven by persistent heat in the West. Demand for fleece, outerwear, and similar categories could be stronger earlier is the season which bodes well for more higher-margin sales. The warmer and drier trend persisted into October last year for many western markets. Retailers that planned for a rebound in sales in the West and allocate inventories accordingly will see reduced risk of out-of-stocks and be in a position to capture strong year-over-year sales. Planalytics is projecting +5% to +15% WDD (vs. the prior year) for rainwear, heaters, fall/winter clothing, and other seasonal categories in western markets in the early fall period.