Holiday ‘Sales Creep’ May Burden Inventory-Laden Retailers

Right now, the headlines and news stories detailing the deluge of holiday merchandise on retailers’ shelves are a bit whimsical.

Christmas is here, is the read across – and it’s only August.

As reported in recent days by CNN and other media outlets, back to school shopping is still underway. But in many cases, retailers are already bringing Santa into the aisles, alongside wreaths and reindeer too.

“Now, the Christmas “creep” is trumping not only Halloween, but also competing with consumer spending on back-to-school and Labor Day sales,” observed CNN, noting that Lowe’s and Home Depot, among others, have been among the early promotors of holiday goods. Not surprisingly, Amazon is seemingly in every retailers’ crosshairs as a prime competitor.

But there are at least some signs that that the waves of holiday merchandise may lap up against the staples and summer goods that have already lined both physical and virtual aisles, and inventory may pile up.

That’s because consumers are just on the verge of seeing discretionary spending feel an even further pinch, where the resumption of student loan repayments are likely to shave discretionary income by several percentage points.

Some Pockets of Declines

As PYMNTS has documented, earlier this month, even as retail sales remain buoyant, a lot of the spending has been on food, and there are categories where spending has actually declined, as of July. The Commerce Department’s most recent report highlighted the furniture segment, where sales slipped 1.8%, while electronics and appliance stores saw a 1.3% decline.

And though separate reports/data lags a bit — it’s for June — overall inventory levels indicate that it’s taking a bit longer for merchants to sell what they’ve already got on hand. The U.S. Census Bureau estimated that in June, retailers’ business inventories crept up 0.7% month on month, while sales were up 0.2% in the same period. The inventories/sales ratios stood at 1.3 months, up from the 1.24 seen last year and flat with the 1.3 ratio logged in May.

For the retailers that stock up on holiday-themed goods in a bid to keep consumers spending, there’s the question of what happens with the inventory that’s already on hand – after all, a dollar spent here is a dollar that cannot be spent there, so to speak.

We’ve yet to see the full impact of back to school spending, and whether that might make consumers pause a bit before spending anew into the all-important holiday shopping season. And there’s a possibility, too, that holiday sales might be “pulled forward” a bit, which means there’s less firepower for later in the year.

Any real dry powder — in the form of excess savings — seems to be rapidly depleting. As noted here, the Federal Reserve has estimated that pandemic-era savings, peaking at about $2 trillion, have been drawn down, and now stands at about $190 billion…and that cushion may be fully deflated in the current quarter. Right into the holidays — signaling that some spending headwinds may lie ahead.