Retailers are reportedly bracing for a tough holiday season, with economic demand slowing and outlooks mixed.
Despite offering higher discounts and competitive promotions, retailers are uncertain if these measures will be enough to stimulate spending during their most important period of the year, Reuters reported Tuesday (Nov. 21).
October’s retail sales figures reveal that economic demand in the United States has shown signs of slowing down, according to the report. This has raised concerns among retailers, who are now uncertain about the holiday season ahead.
Home improvement retailer Lowe’s, electronics retailer Best Buy and department store chain Kohl’s have all reported lower sales at stores open at least a year in the most recent quarter, the report said. They have also cut their sales forecasts for the year.
Best Buy CEO Corie Barry acknowledged the challenges retailers are facing, stating that consumer demand has become even more uneven and difficult to predict in the current macro environment, per the report.
The National Retail Federation predicts that U.S. holiday sales will rise at their slowest pace in five years, according to the report. Walmart has already warned about this trend as the holiday shopping season gets underway.
Several factors contribute to the cautious consumer spending outlook, the report said. Higher interest rates, inflation and the resumption of student loan repayments are expected to keep consumer wallets under pressure.
Lowe’s CEO Marvin Ellison noted that while consumer spending remains relatively resilient, discretionary dollars are being spent across a wider range of activities compared to a year ago, per the report.
Despite these challenges, some investors remain optimistic and expect the holiday sales period, starting with Black Friday and Cyber Monday, to hold some positive surprises, according to the report. With inflation numbers stabilizing and interest rates no longer rising, there is hope for improved consumer sentiment. Thomas Hayes, chairman of hedge fund Great Hill Capital, believes that Black Friday and Cyber Monday could perform better than expected, the report said.
However, concerns about declining consumer spending still loom large, per the report. Apparel retailers Abercrombie & Fitch and American Eagle Outfitters posted upbeat quarterly results on Tuesday, but their shares dropped due to investors’ broader concerns about consumer spending.
PYMNTS Intelligence has found that consumers plan to cut holiday spending without skimping on gifts. While consumers plan to spend 26% less on non-gift purchases this holiday season compared to last year, they expect to spend 2.2% more on gifts, according to “The Credit Economy: How Consumers are Approaching Holiday Spending and Travel,” a PYMNTS and i2c collaboration.