Retailers Forecast ‘Very, Very Soft’ 2023 Outlooks

Last week was one of good news and ominous news for U.S. retailers.

The good: They were able to present better-than-anticipated earnings as shoppers continued spending despite inflation. The ominous: These same retailers forecast smaller sales growth in the year to come.

“What’s spooking investors and what is causing concern is that all of the outlooks are very, very soft, and people are really talking down the prospects for the coming year,” said Neil Saunders, managing director at GlobalData, told The New York Times in a report Saturday (March 4).

“They’re talking about sales declines, further crunch in profits, and that really sets the tone that 2023 is going to be a very muted year for retail.”

As PYMNTS wrote recently, that tone could be heard in the earnings reports last week from three department store chains and Best Buy, all showing grim news when it comes to consumer spending on nonessential items.

Macy’s, Nordstrom, and Kohl’s all reported declining sales, while Best Buy projected its sales would drop 3% to 6% in the coming fiscal year.

“At first glance, these earnings seem to contradict recent headlines about consumer spending rebounds following the latest census-released retail numbers,” PYMNTS wrote. “However, a deeper dive into consumer spending demonstrates that any economic bounce-back may still be months away.”

Comparing census sales data with the Bureau of Labor Statistics CPI reports, it becomes clear that shoppers aren’t buying more items but instead are paying more for the same or paying more for less.

These findings and this week’s earnings reports jibe with PYMNTS’ long-running research on consumers’ finances and spending habits.

Shoppers’ shift from discretionary spending has been recently noted in the December PYMNTS collaboration with Lending Club, “New Reality Check: The Paycheck-to-Paycheck Report 2022 Year in Review.”

PYMNTS research shows that an average 22% of U.S. incomes are spent solely on food, clothing and shelter, leaving little room for extras. And this is all before Supplemental Nutrition Assistance Program (SNAP) benefits are reduced this month.

But it’s not just lower income consumers cutting back. According to PYMNTS data, 34% of high earners now say they live paycheck to paycheck without issues paying their bills. Of that high-earning group, 36% expect their financial situations to improve, a drop of 5 percent from last summer. PYMNTS found that only a little more than a third of these consumers plan to spend money on leisure travel, purchase new cars or buy expensive clothes.