Contact: Laura Wilker
Deloitte Services LP
212-492-2871

Contact: Chris Rieck
Hill & Knowlton
212-885-0580

NEW YORK, September 21, 2007 – Mixed signals in the economy may cause Americans to pull back on holiday spending this year, but retailers are ready, having already put inventory and head count controls in place to better manage costs

“A number of unsettling factors in the economy, including the declining housing market, a volatile stock market and rising unemployment claims, will likely add up to a mixed holiday season for retailers this year,” said Carl Steidtmann, chief economist for Deloitte Research. “Despite the recent rate cut, we expect that the past tightening of credit for mortgages and refinancings will continue to have a negative impact on housing sales and also deplete a source of cash that consumers have come to rely upon. On the positive side, weekly chain store numbers have been holding up well. In addition, back-to-school spending fared well – particularly at the high-end – which is a positive indicator for holiday spending, and Christmas and the holidays are an American tradition that consumers seem determined to live up to."

Deloitte’s Retail group expects holiday sales, excluding automobiles and gasoline, to increase 4.5-5 percent during the November-to-January period, less than last year’s 5.1 percent increase, and a more modest holiday selling season compared to the past decade.

“Retailers have done a very good job anticipating economic conditions, so they shouldn’t be caught by surprise,” said Stacy Janiak, Deloitte’s U.S. retail leader. “They have kept their inventories lean, their payrolls low, and other costs in check, which will likely cushion them somewhat from a mixed holiday season. Retailers will be most successful by conducting innovative promotions to bring shoppers into stores and increase share of wallet, and by carefully managing inventory to maintain fresh selections throughout the season.”

Retailers can also learn from past holiday seasons. A survey commissioned by Deloitte in January 2007 found that retailers lost sales during the holiday season due to customer service, store navigation and inventory issues.  Out-of-stock items, long lines at registers, unavailable or unhelpful sales help, and confusing store layouts caused many customers to leave stores without making purchases. “Retailers need to minimize these missed sales opportunities,” continued Janiak. “Creating a positive customer experience is within a retailer’s control and, importantly, helps create long-term customer loyalty.  In addition, we expect consumers to consider a broader range of factors when making purchasing decisions, such as the country of origin of the products. If, as we expect, consumers will be more selective in their shopping this year, then retailers might also want to communicate with shoppers about product integrity, brand image, and company reputation so that shoppers feel good about buying from them.”

For more information about Deloitte’s Retail group, please visit www.deloitte.com/us/retail.