What is the story of over ordering, shipping mayhem, and big holiday deals? A data-driven analysis of the U.S. retail sales increase through December 1 to December 24
This is a story of over ordering, shipping mayhem and constant pandemic changes to shopping habits. And it ends with full racks, price cuts and promises of big holiday deals.
Families will likely reduce the number of recipients, use credit cards and dip into savings to pay for their loved ones holiday gifts, according to an industry forecast Thursday.
Americans spent more this season to keep up with high prices. Mastercard says US retail sales went up by 7.6% in the period from November 1 to December 24. US retail sales were lower than expected in November, falling 0.6% during the month, which was the weakest performance in nearly a year.
The consumer is in better shape than last year. Savings levels are high relative to historic levels, but jobs and wages are strong. Revolving credit is rising and inflation has surpassed wage growth. [We] expect the allocation of disposable income to continue shifting toward services and essential goods. … We think that the desire to go on vacation, be with loved ones, and attend events has not diminished and expect occasion-based demand to continue.
The group said that the holiday online will go up between 10% and 12% to between $262.97 billion and $268.9 billion.
The warm January and the holiday discounts gave shoppers a shopping spree to start the year. Big-box and food giants like Walmart, Target, Kroger, and others are reporting increases in sales due to higher prices.
That compares unfavorably with last year’s robust 15.1% increase, but this year’s expected slower growth is in line with where holiday retail sales were trending pre-pandemic.
Walmart
(WMT) on Tuesday reported annual US sales growth of 8.2% last quarter at stores open for at least a year. The results beat Wall Street analysts’ expectations, pushing Walmart
(WMT)’s stock up around 6% during pre-market trading Tuesday.
According to Neil Saunders, an analyst at GlobalData Retail, consumers want value and lower prices, even in tough times.
Consumer Demand, Supply, and Delivery During the November November pandemic: From Low-Cost Supermarkets to Fast Food Stores
Consumer prices soared by 7.1% year-over-year in November. It would be alarmingly high almost anywhere else in the past 40 years. But this marked the fifth-straight month of improvement and a significant cooldown from 9.1% in June. It’s also the lowest annual inflation rate in nearly a year.
Fast food spots like Wendy’s are seeing more higher-income customers, who may be switching from pricier restaurants. Walmart’s grocery sales have increased due to these wealthier shoppers.
Most companies, including Gap and J.Crew, have tackled their inventory worries by cutting prices and staging sales. Some are packing away more evergreen items, like generic t-shirts they might try to sell next year. Many clothes are going to discount chains.
The partner in the consumer practice at the consulting firm, Brian Ehrig, has seen it all. All of the sleepwear and tops are seeing quite a lot of demand.
In any year, clothing stores do a bit of a tightrope act, trying to predict trends and order goods months in advance. The pandemic made that extra tricky. First, in a blink of an eye, lockdowns had millions of people trading their office clothes for sweatpants and house dresses. With shoppers staying home, malls emptied out and storied clothing chains tipped into bankruptcy.
A big shopping boom came next. Retailers hit the gas pedal, ordering more and more. Then, the fairly sudden travel bonanza, in-person parties and the return to office meant everything changed – again.
shipments from Asia have seen a lot of disruptions Remember last winter’s shortages and delays? Many stores took no chances with this year’s Christmas shopping demand, and placed those orders even earlier than usual.
“No one wants to miss the holiday season, they really need that product,” says Fernndez. Now that you have it, you have too much. That’s the dilemma.
There were some seasons landing in the marketplace at the same time as the delayed shipments for the spring, summer and fall seasons arrived too late, according to Nike CFO Matt Friend.
Retailers getting some inventory late, orders that they didn’t really need, and then consumer demand slowing were added to a confluence of events.
Target and other retailers say high food and gas prices are making people cut back on discretionary purchases.
Less demand means less inflation: Apparel prices are up less than other goods, only 4% higher than a year ago, actually falling for the past two months. Spending at clothing stores rose about 3% in October compared to last year, and is expected to decline over the holidays.
“I think what really caught (retailers) flat-footed is just the pullback and the change in the consumer buying habits,” says Adam Davis, who works with department stores and other retailers as managing director at Wells Fargo.
Does this mean widespread discounts for the holidays? Davis, Ehrig and Fernández all say, yes, very likely. Will people decide they actually want more clothes? That’s a whole other thing.
The Fed is Soft-Landing in the 2020s: How Did the US Economy Become More Resilient? And Where Will Consumer Spending Go?
The stock market had a brutal period, with the S&P 500 losing onefifth of its value and the Nasdaq dropping more than one-third. The US markets have had their worst years since 2008.
It’s hiring that remains surprisingly resilient. The unemployment rate dropped dramatically in the spring of 2020 after the economy added 263,000 jobs in November.
New numbers published last week show first-time applications for unemployment benefits edged up to 225,000. That’s still low historically and almost exactly where jobless claims were a year ago, long before recession fears emerged.
Mark Zandi, chief economist at Moody’s, said that the economy could skirt a recession. Without mass layoffs, it’s unlikely that consumers will stop spending.
If this trend continues, it could significantly lower the risk of a recession. But if inflation remains well above the Federal Reserve’s 2% target, that would be problematic.
Source: https://www.cnn.com/2023/01/02/economy/recession-or-soft-landing-in-2023/index.html
The Macy’s Way: Why the Fed is Getting It Wrong, and How to Resist the Cosmic Censorship Challenge
Gas prices have plummeted after hitting a record high of more than $5 a gallon in June. The national average for regular gasoline fell to $3.10 a gallon, an 18-month low, in recent days, though it has crept higher recently to about $3.22 a gallon.
But that trend has begun to reverse, at least when measured on a monthly basis. Real wages have been growing faster than consumer prices, a significant shift that could give consumers firepower to keep spending next year.
If the Fed raises rates so much that they cause a recession, they will already have done that.
Powell made it clear that the Fed wasn’t ready to hit the gas by cutting rates. But just removing its foot from the brake would be a positive.
Macy’s chair and CEO Jeff Gennette said lulls during the non-peak holiday weeks “were deeper than anticipated” and that consumers will continue to feel pressured into 2023, in a Q4 update Friday.
Macy’s said it expects its net sales to be in the low to mid-point of its previous range during the holiday quarter. The retailer said that its earnings per share would be in the range of $1.50 to $1.67.
“Overall, our occasion apparel and gift-giving business were strengths, and inventory composition and price points aligned with customers’ needs,” Gennette said, noting that its high-end Bloomingdale’s stores and cosmetics line Bluemercury continued to outperform forecasts.
The Macys CEO believes that consumer will be pressured in the first half and that they have planned inventory mix and depth of initial buys accordingly.
Consumer Spending: How Do Stores and Online Retail Stores Are Facing in the Context of a Tight Labor Market?
Walmart recently announced that it will raise its minimum wage from $12 to $14 an hour as it tries to retain store workers in a tight labor market for lower-wage industries. Home Depot said on Tuesday that it will spend $1 billion to raise wages and other compensation.
Walmart will have to raise prices and squeeze margins at the same time that its lower income shoppers are being hit by inflation, which could hurt sales this year.
Bankruptcies are piling up: Party City, Tuesday Morning, mattress manufacturer Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.
Credit rating agencies say that Bed Bath & Beyond, as well as other chains, are on a watch list. These companies have struggled for a while and are vulnerable to economic downturns.
Target CEO Brian Cornell said this week that soaring inflation forced families to put their discretionary purchases on hold and focus on necessities.
“The promotional environment went a little bit deeper, and we believe it’s going to go a little bit longer,” Under Armour
(UA) finance chief David Bergman said last month.
Best Buy finance chief Matt Bilunas said that the consumer electronics industry continues to feel the effects of the broader macro environment. Comparable sales are expected to fall 3% to 6% at Best Buy this year.
Some discount chains may benefit from consumers seeking out bargains. TJX expects comparable sales to increase by 3% this year. According to Placer.ai, shoppers visiting discount grocery stores have increased.
It’s a type of anxiety that’s tentative. Large store chains such as Walmart, Home Depot and T.J.Maxx are steeling for a tricky year, given that shoppers have begun cutting back — but how much further? Macy’s and Best Buy are some retailers that are already feeling the slowdown.
More than a dozen retailers have dropped a flurry of financial reports in recent weeks. They have a broad view of consumer spending, which is a key driver of the U.S. economy. Here’s what they say.
“Customers are still spending money. … It’s obviously not as clear to us what the back half of the year looks like. … We could be in a recession. We don’t know what is happening to consumer spending. We don’t know what happens to layoffs, household income.”
The retail and food companies that were tracked by CFRA were stung by the surprising twists of the year, such as soaring inflation and the war in Ukraine. They want to set low expectations for the next year.
Shoppers are being choosy (or “choiceful,” as Walmart put it) as they buy fewer electronics, for example, spending that money instead on essentials. We heard this from Kohl’s, Walmart, Target — and Best Buy, which forecast that 2023 will be the worst year yet for sales of computers and other consumer electronics.
The makeup, skincare and perfume counter are places where shoppers are splurging. Target and Kohl’s (which has a deal with Sephora) both called out high spending on beauty products as one way they’re offsetting loss of interest in other departments.
Home Depot blamed a recent slowdown in shopping on, among other things, shoppers dedicating more of their budgets to outings and trips. The retailer said people are still renovating and doing projects, but spending more carefully on big-ticket items like appliances, grills or patio furniture.
In that vein, Costco’s CFO Richard Galanti mentioned some tentative signs that people may be starting to spend more on things that they may need for activities, like camping and water-sports gear. He also flagged easing inflation:
“What we are seeing is the consumer making $80,000 a year is trading down… The current economic climate is driving more higher-income consumers into value retail.”
Store brands are on the rise, too. The private brands of Target and Walmart are getting more attention from shoppers, as opposed to national brands. Companies have higher profits from these products.
The impact of the Pandemics on the Consumer Spending: a CFRA Analyst at a Redundant Energy Source
A lot of the current spending has been aided by the low unemployment rate and savings built up during the Pandemics, says a CFRA analyst.
“The consumers still have a willingness to spend but their ability to spend has begun to decline, so it’s starting to be more alarming rate,” he said.