Dive Brief:

• U.S. retail sales, excluding automobiles and gasoline, are anticipated to grow 3-4% in 2017, in line with the 3.8% growth predicted for 2016, according to Fitch Ratings’ Outlook report. More than half of such growth will occur online, while in-store growth will be limited to 1%.

• Fitch Ratings predicts Dollar Tree, Burlington Stores, Levi Strauss, Coach and J.C. Penney are on a positive trajectory, while Sears, Claire's Stores, Gymboree, Abercrombie & Fitch, Vince and BonTon will face significant challenges.

• Omnichannel services will be critical as retailers continue to adapt to shifting consumer habits: "Spending focus on services and experiences appears here to stay, so the dividing line between best-in-class retailers and market share donors is increasingly going to be determined by which retailers can cater to the evolving landscape," said David Silverman, senior director of U.S. corporates at Fitch Ratings.

Dive Insight:

The retail industry is undergoing a transformative period, with consumer expectations for immediacy and connectivity challenging both brick-and-mortar stores and pure-play e-commerce players alike. For 2017, Fitch Ratings says the importance of omnichannel is omnipresent, and retailers have some work to do in that department.

“[Retailers] are all in Stage 1 out of three stages in building out their omnichannels,” Robin Lewis, CEO of retail strategy publication The Robin Report and a former executive at VF Corp. and Women’s Wear Daily, recently told Retail Dive. “Some of them are further along than others, Macy’s and Nordstrom are further along than most, but they’re all in the early stages of that. That’s the most immediate short term trend that has long term implications. They have to get it right.”

Dollar Tree is one retailer Fitch Ratings expects to do well in the new year, which should come as no surprise: Wealthy millennials are increasingly shopping at dollar stores, saving those businesses from the woes hampering many retailers in recent quarters. J.C. Penney is also predicted to ride a positive wave into 2017. The retailer has made significant gains on its turnaround plan this year as it continues to offset declining apparel sales with new partnerships to boost its appliance and home goods assortment.

On the other hand, Sears is projected to face an even tougher year. Despite cash infusions from CEO Edward Lampert’s hedge fund, the retailer’s turnaround plans have fallen flat. This year, Sears Holdings has announced nearly 100 store closings between its Sears and Kmart units. Earlier this month it posted its 20th straight quarterly decline and announced more unprofitable stores are slated to shutter in 2017.

To Neil Saunders, CEO of retail research agency and consulting firm Conlumino, Sears is like the Titanic. “[I]n our view [Sears] is now firmly on a trajectory to failure," Saunders told Retail Dive in an email. "Sears may dispute this, just as in 'Titanic,' Mr. Ismay protested that ‘this ship can’t sink.’ But as Mr. Andrews firmly reminded him: ‘I assure you, she can. And she will. It is a mathematical certainty.’”