Will Cheap Gas Drive Holiday Sales?

Rejoice. Gas prices are at the lowest they’ve been in nearly 4 years, topping off at an average of less than $3 a gallon. Still, CFOs aren’t hopeful that extra cash will get into their stores this holiday season, the Wall Street Journal reported.

Gas prices are nearly a $1 less per gallon than in June, the report said, which cited Morgan Stanley estimates that said consumers have an extra $40 billion more to spend during the holiday season as a result of lower gas prices. CFOs say that’s not enough to give investors any indication that will be reflected in the end-of-the year earnings projections since gas-price trends can be as volatile as the retail market.

“We’ve been fooled before,” Jack Kleinhenz, chief economist for the National Retail Federation, told WSJ. Gas prices may drop at the end of the year and jump before the new year. The article also referenced the “teetering European economy and a recession in Japan” that’s already impacting multinational retailers.

But the American outlook is much different this holiday season, WSJ reported: “Kleinhenz predicts a 4.1 percent jump in U.S. holiday sales, mainly because of the stronger American economy. He hopes for a bigger boost, but consumers have been stingier with their spare cash lately.”

Americans may have more to spend at the pump or at stores this holiday season, but most CFOs said they’ll wait to see how the end of the year shapes out before making forecasts. Hackett Group’s Jason Balogh, who advises companies on financial planning and reporting, told WSJ that companies aren’t great at interim forecasting since the mindset is focused on an annual planning basis.

Fuel prices have dropped 12 percent since the middle of last month, WSJ said, but that’s not necessarily enough to give consumers the confidence to spend extra money. While most CFOs aren’t quick to alter forecasts due to gas prices, some executives are hoping they can use the low fuel prices to encourage people to shop.

“With gasoline prices being low, the consumer will feel good about their family budget, and they will come out and shop,” WSJ reported J.C. Penney CEO Myron Ullman told analysts last month.

But that’s also coming from a CEO who could use a boost this holiday season.


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