Increasing online sales, shifting consumer spending habits, and limited replenishment purchases in apparel will eat into in-store bricks-and-mortar sales growth, according to Fitch Ratings' 2016 US retail outlook.
Fitch expects in-store sales will grow just 1.5-2 per cent next year, below the 3-4 per cent expected for the US retail industry overall.Increasing online sales, shifting consumer spending habits, and limited replenishment purchases in apparel will eat into in-store bricks-and-mortar #
'The growth of e-commerce will be the great differentiator for many retailers- an opportunity for some and a threat to others,' said David Silverman, Senior Director. 'It has fundamentally changed the way retailers think about their operations, investments and branding.'
Fitch expects e-commerce will account for 15 per cent of total retail sales and 50 per cent of growth in total retail spending in 2016. This will continue to erode in-store traffic and spending, necessitating investments in real estate, product distribution, inventory, and IT infrastructure, among other things, that may pressure margins in the near term. Department stores will remain the most-pressured segment, with additional store closings possible.
Fitch's retail sector outlook remains stable, with continued wage growth constraints or an unexpected economic downturn being the two largest threats. However, even in those scenarios mass downgrades in Fitch's portfolio would be unlikely, given most retails have enough cushion in their current ratings to withstand a downturn. (SH)
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