Report: Retail growth outlook remains modest

Retail sales will grow modestly over the next year or so but holiday sales may not bring as much cheer as hoped, a new report said Monday. 

Amid stronger jobs growth and brighter economic conditions, consumers are expected to remain cautious in their spending habits while wages fail to grow at a faster pace, the Moody's Investors Service said in a report.


"We expect U.S. retail sales to increase modestly this year, with a moderate pick-up in 2015 as GDP growth accelerates," said Mickey Chadha, vice president and senior analyst of the report. 

"That said, economic fundamentals remain mixed and lower-end consumers are still not sharing equally in the U.S. economic recovery, so it's difficult to see what will drive overall consumer spending higher," Chadha said.

Home improvement, drug stores and auto retailers will boost growth for retailers in the next 12 to 18 months.

Apparel and footwear stores also will outperform next year, while discounters and warehouse clubs are expected to show improvement but will continue to underperform.

Big retailers such as Home Depot, Inc., Dollar General, Best Buy and CVS, are expected to post the best growth, the report said.

Meanwhile, online sales will continue as the fastest-growing segment in the industry, although they still make up only a small part of the retail landscape.

Overall, the outlook remains stable.

Drilling down into specifics, Moody's expects retail sales to increase by 3 to 4 percent this year and at a faster 4 to 5 percent in 2015.

"Retails sales historically outperform GDP growth and this will continue to be the case, yet incomes remain depressed, wage growth is weak and underemployment persists," Chadha said.

Moody's also expects operating income growth for retailers to be in line with sales growth next year, running about 4 to 5 percent.

A lack of new product launches outside of Apple products has created the more pessimistic holiday outlook. Sales won't grow much beyond 4 percent in the final three months of the year, the report said.