Press Release from K.I.D.S. following Magic - Thought it would be useful information for all.  

Analyst Predicts Retail Sales Will Decline Up to 6% in 2009,

Identifies Key Factors to Influence Retailing at K.I.D.S. Industry Seminar

Las Vegas, February 18, 2009 – The unexpected rebound in U.S. retail sales in January will not continue according to Piper Jaffray Companies analyst Jeffrey Klinefelter, who told apparel retailers and manufacturers gathered at the MAGIC Marketplace trade show today that retail sales will likely decline between 5% and 6% in 2009 in the apparel and footwear markets.  Klinefelter’s remarks were part of a seminar presented by the industry charity Kids In Distressed Situations, Inc. (K.I.D.S.), which is concerned that the worsening economy could bring a reduction in donations this year.

“Based on number of economic factors and assumptions, we estimate that personal consumption expenditure will decline by approximately 4% in 2009,” said Klinefelter.  “For all of 2008, personal consumption expenditure rose 3.6%, a significant decrease from the 5.7% average over the prior five years.  Given the historic spread between personal consumption expenditure and retail sales, we estimate retail sales will decline by 5% to 6% in 2009.  For all of 2008, retail sales were up 3.7%, a significant decrease from the 6.1% average over the prior five years.  We believe this is a balanced and conservative outlook and subject to change pending the effectiveness of the government stimulus package.”

Continued and rising unemployment, decreases in the availability of consumer credit, declines in housing values and increases in the personal savings rate could all combine to create a skittish consumer and problematic environment for retail goods in 2009.  Currently, K.I.D.S. donations for January 2009 are $3.3 million worth of product compared to $3.7 million for January 2008.

“The economic problems are troubling for us on two levels,” said Janice Weinman, president of K.I.D.S.  “As more Americans face hardship they will certainly put extra stress on our social safety net, making it harder for the community service agencies we support to help the newly disadvantaged.  Additionally, donors that provide us with products and funds may be more conservative in their contributions, limiting the number of people we can ultimately help.”

New clothes, shoes, books, toys, juvenile products and back-to-school items donated by manufacturers and retailers are distributed by K.I.D.S. to children in need through more than 1,000 grassroots non-profit agencies.  In 2008, K.I.D.S. distributed more than $61 million worth of new products reaching over 4 million individuals.  The organization’s web site, www.kidsdonations.org, lists the companies that have donated in the past and the agencies that have helped distribute the products.

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2009 Retail Sales Decline, page 2

Demographic trends for retailers could also impact sales in 2009, according to Klinefelter.  While the teen demographic has been a tailwind for retailers with 13% growth over past 10 years, a 3% contraction for this group is estimated over next five years.  The children’s demographic may provide some opportunity, with growth for 0-6 year-olds and 7-12 year-olds estimated at 2% versus <1% for the total population; parents and grandparents may support spending trends and also the development for specialty retail channels.  Young adults are another key consideration for brands, with 5% growth estimated for 19-30 year-olds versus <1% total population.

The down economy is also shaping consumer behavior with regards to the apparel and footwear markets.  Spending budgets are constricting as inflation hits non-discretionary classes of goods and services, and product development cycles will likely favor utilitarian goods like furniture and electronics over clothing.  The retailing business itself is also being affected according to Klinefelter, with e-commerce changing store economics and discount, specialty and off-price retailers gaining at the expense of traditional department stores.

Klinefelter identified several characteristics of retailers and manufacturers that will help them survive in 2009:  A strong cash position with minimal leverage outside of leases; demonstrated discipline for inventory management; seasoned management teams that have withstood fluctuating economic cycles; planning business to trends; and a focus on key item pricing for conversion to additional sales.

Media Contact:

Peter Paris, K.I.D.S.

Cell: 917-528-0401

Office: 212-279-5493 x203

E-mail: pparis@kidsdonations.org