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Barry sees challenging holiday season

With the opinions about the upcoming holiday season ranging from the positive to the negative, analyst Dan Barry definitely fell to the pessimistic side on the panel. He believes that this will be the worst holiday season in a decade.

Though Barry, managing director at Merrill Lynch, estimates the sales of general merchandise for the Christmas season will increase 3 percent — not as bad as the last recession growth of 0.2 percent — "it's the smallest increase since the last recession, and the smallest non-recession Christmas in 15 years."

Calling himself "the Grinch," Barry gave attendees his "Twelve 'Nays' of Christmas" as reasons why this will be a very challenging season for retailers. Several reasons had do to with things that were falling, like consumer confidence, and declining payrolls. Real wages, he said, which were going up after the recession last year, are also now headed downward. Stock market drops, in addition, will result in negative wealth and unemployment has been increasing.

World events will also have a negative impact on the season, he said. The impending threat of war with Iraq, for example, and rising oil prices will have an impact on shoppers. Backed-up merchandise at the West Coast ports is also cause for concern, especially for apparel, which is such a fast-turning business, he said, adding that the Gap already has said that 25 percent of its goods will be late because of it. Retailers also have potentially bloated inventories, he added, another liability.

And the season will be up against a tough comparison to last year's holidays, since Christmas was on the positive end of a post-Sept. 11 sales surge last year. Many people stayed home for the holidays last year and went out to shop — not only for general merchandise, but also in restaurants, apparel and electronics. Many thought it would be an awful Christmas last year, he said. "But they actually spent more at the store."

And if retailers don't have it tough enough, this year's holidays have six fewer shopping days between November and December.

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