BMO Capital Markets: Pent up Demand and Low Inventories Mean No Huge Bargains for Shoppers this Holiday Season 

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• No “hot product”, but Xia-Xia hermit crabs, Barbie, Lego and Smurfs are all doing well

• Sales of Nintendo 3 DS to pick up

• Expect a good holiday season at the movies, withPuss in Boots, Happy FeetandTwilight: Breaking Dawn,Pt. 1,Alvin and the Chipmunks, Sherlock Holmes, Girl with the Dragon Tattoo, Mission Impossible Part 4and Steven Spielberg’sThe Adventures of Tintin

NEW YORK, November 22, 2011 –

BMO Capital Markets expects the combination of retail incentives, low interest rates, and major retailers, such as Toys “R” Us and Walmart – opening their doors on Thanksgiving evening will encourage shoppers to a moderate increase in their holiday spending.

Sal Guatieri, Vice President and Senior Economist for BMO Capital Markets

• “We've seen moderate increases in spending this year and expect spending growth to continue at about a two per cent pace in the holiday season. There is a lot of pent-up demand for discretionary items, which means we might see a better holiday season for retailers of non-essential products such as games. However, demand for big ticket items, such as furniture, is likely to remain soft given Americans’ ongoing focus on debt repayment. As well, with retail inventories being so lean this year, shoppers might not see as much discounting as they had in prior years.”

John D. Morris, Retail Apparel Analyst

• “Retailers want to divert consumers’ attention to deals and ‘happy bargains,’ such as gifts with purchase. This holiday will be one of ‘rational exuberance,’ both on the part of the retailer and the consumer.

• From the retailer’s standpoint, it’s ‘rational’ in the sense that the inventory is very well planned with most retailers planning lower levels - down anywhere from 5 percent to 10 percent compared to last year.” “This is because retailers have been enduring higher sourcing costs (labor from the Far East, the fabric costs, etc.) and really don’t want to be stuck with a lot of carryover goods at the end of the season.

• ‘Exuberance’ because we think retailers are advertising very good promotions and deals. They know the consumer is anxious and distracted with all the uncertainties swirling overhead, such as the Euro crisis and the political and U.S. budget strife at home.”

Gerrick Johnson, Retail Toy Analyst

• “We are expecting flat overall growth in toys and believe that retailers are being more cautious than ever this year. We are also seeing more of a shift towards promotions in-store, rather than in print media and on TV.”

• “There is no hot product this year, though Cepia’s Xia-Xia hermit crabs, Barbie, Lego and Smurfs are all doing well.”

Edward Williams, Entertainment & Leisure Analyst

• “About 40 percent of annual software unit sales and about 45 percent of annual hardware sales will occur in November and December. Each week after Black Friday is more important than the preceding week and each week of December is equivalent to the third biggest month of the year in terms of video game sales.”

• “Looking into the holidays, we expectCall of Duty Modern Warfare 3to drive growth for software sales to HD consoles in the balance of the year. We expect sales of Nintendo 3 DS to begin to pick up as we get closer to the holidays, but the overall dedicated game handheld market will remain under pressure through the balance of the year as smartphone and tablet games continue to gain traction especially in Western markets.”

Jeffrey Logsdon, Entertainment and Gaming Analyst

• “We expect this will be a pretty good holiday season at the movies. In the second and third quarters we saw box offices up nicely into the mid-single digits. We saw attendance up and certainly consumers demonstrated that if there are good movies out there, they’re willing to go and this holiday season should be no different.”

• “This holiday we’ve already hadPuss in Bootscome out but we’ve got a number of movies that will kind of feed all genres of moviegoers:Happy FeetandTwilight: Breaking Dawn,Pt. 1will probably get overwhelming response from consumers. As we move on through the holiday season you knowAlvin and the Chipmunksare coming back, as are the nextSherlock Holmesmovie and the thrillerGirl with the Dragon Tattoo. We’re going to see Tom Cruise inMission Impossible Part 4and Steven Spielberg’sThe Adventures of Tintin, which has already done well overseas.”

To arrange interviews with BMO Capital Markets’ retail analysts regarding their outlook on the 2011 holiday shopping season, please contact Martha McInnis at 212-702-1992.

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Media Contacts:

Martha McInnis, Toronto,martha.mcinnis@bmo.com, (212)-702-1992

About BMO Capital Markets

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• No “hot product”, but Xia-Xia hermit crabs, Barbie, Lego and Smurfs are all doing well

• Sales of Nintendo 3 DS to pick up

• Expect a good holiday season at the movies, withPuss in Boots, Happy FeetandTwilight: Breaking Dawn,Pt. 1,Alvin and the Chipmunks, Sherlock Holmes, Girl with the Dragon Tattoo, Mission Impossible Part 4and Steven Spielberg’sThe Adventures of Tintin

• “We've seen moderate increases in spending this year and expect spending growth to continue at about a two per cent pace in the holiday season. There is a lot of pent-up demand for discretionary items, which means we might see a better holiday season for retailers of non-essential products such as games. However, demand for big ticket items, such as furniture, is likely to remain soft given Americans’ ongoing focus on debt repayment. As well, with retail inventories being so lean this year, shoppers might not see as much discounting as they had in prior years.”

• “Retailers want to divert consumers’ attention to deals and ‘happy bargains,’ such as gifts with purchase. This holiday will be one of ‘rational exuberance,’ both on the part of the retailer and the consumer.

• From the retailer’s standpoint, it’s ‘rational’ in the sense that the inventory is very well planned with most retailers planning lower levels - down anywhere from 5 percent to 10 percent compared to last year.” “This is because retailers have been enduring higher sourcing costs (labor from the Far East, the fabric costs, etc.) and really don’t want to be stuck with a lot of carryover goods at the end of the season.

• ‘Exuberance’ because we think retailers are advertising very good promotions and deals. They know the consumer is anxious and distracted with all the uncertainties swirling overhead, such as the Euro crisis and the political and U.S. budget strife at home.”

• “We are expecting flat overall growth in toys and believe that retailers are being more cautious than ever this year. We are also seeing more of a shift towards promotions in-store, rather than in print media and on TV.”

• “There is no hot product this year, though Cepia’s Xia-Xia hermit crabs, Barbie, Lego and Smurfs are all doing well.”

• “About 40 percent of annual software unit sales and about 45 percent of annual hardware sales will occur in November and December. Each week after Black Friday is more important than the preceding week and each week of December is equivalent to the third biggest month of the year in terms of video game sales.”

• “Looking into the holidays, we expectCall of Duty Modern Warfare 3to drive growth for software sales to HD consoles in the balance of the year. We expect sales of Nintendo 3 DS to begin to pick up as we get closer to the holidays, but the overall dedicated game handheld market will remain under pressure through the balance of the year as smartphone and tablet games continue to gain traction especially in Western markets.”

• “We expect this will be a pretty good holiday season at the movies. In the second and third quarters we saw box offices up nicely into the mid-single digits. We saw attendance up and certainly consumers demonstrated that if there are good movies out there, they’re willing to go and this holiday season should be no different.”

• “This holiday we’ve already hadPuss in Bootscome out but we’ve got a number of movies that will kind of feed all genres of moviegoers:Happy FeetandTwilight: Breaking Dawn,Pt. 1will probably get overwhelming response from consumers. As we move on through the holiday season you knowAlvin and the Chipmunksare coming back, as are the nextSherlock Holmesmovie and the thrillerGirl with the Dragon Tattoo. We’re going to see Tom Cruise inMission Impossible Part 4and Steven Spielberg’sThe Adventures of Tintin, which has already done well overseas.”

News Source : BMO Capital Markets: Pent up Demand and Low Inventories Mean No Huge Bargains for Shoppers this Holiday Season