Moody’s forecasts U.S. retail sales will rise 5% in 2012

New York -- The slowdown in consumer spending is set to continue for the rest of the year, said Moody’s Investors Service in a new sector report entitled "U.S. Retail: Retail Sales Growth Slows Amid a Cautious Consumer.”

According to Moody’s, not all sectors will perform equally. Extreme value stores and off-price retailers such as Dollar General, Family Dollar and TJX are better positioned to outperform other segments as consumers continue to seek value. Wal-Mart Stores, Target and Costco Wholesale Corp will benefit from their growing food business.

"Moody’s forecasts that year over year growth will slow to 4.0% in the third and fourth quarters as cautious consumers will weigh on retail sales," said Maggie Taylor, a Moody’s VP - senior credit officer. "A portion of this decline may be attributed to the unseasonably warm weather that propped up consumer spending in the first quarter."

The rating agency forecasts U.S. retail sales growth will be about 5% in 2012, compared with 7.3% in 2011. Moody’s continues to expect operating income growth to be modest, rising between 3.5% and 4.5% in 2012, driven mainly by slower sales growth as well as by a reduction in some commodity and transportation costs in the latter half of the year.

Luxury retailers Neiman Marcus and Saks Inc. are facing a slowdown in growth as a result of the high-end consumer’s reaction to the euro zone crisis and stock market uncertainty. Also, office supply retailers will feel more pressure on the back of diminishing consumer confidence and continued elevated unemployment, the report said.