December started this week. Retailers have less than a month to post sales results that will be the most important in years. Shopper activity will be affected by inflation and a slowing economy, although no one knows how much. There are only 21 shopping days until Christmas, so waiting for results won’t be long.
Early indications are the store traffic has been modest but has not collapsed. Adobe Analytics reports that Black Friday online sales reached as much as $9.2 billion, which would be extremely healthy results. These numbers are not good enough or bad enough to forecast how the season will end. The National Retail Federation expects holiday sales across the industry to be up 6% to 8% to $4.86 trillion. Many in retail think that number is optimistic as inflation and an economic slowdown hit consumers.
Consumers may be low on money. Inflation spiked early this year. The Consumer Price Index has been above 8% year over year for many months since then. That figure is the highest in four decades. Wages have not increased as fast for most people. That means their holiday budgets will be stretched. One theory is that consumers will use credit or savings to keep their spending on gifts healthy.
There is another pattern that cuts in two directions. The unemployment rate in November was 3.7%, the same as the previous month. The country added 267,000 jobs which were above expectations. The number of people who can afford to shop is healthy. However, high unemployment means inflation is likely to remain high. That, in turn, undermines buying power which is another reason budgets could be stretched.
Another challenging factor is that many retailers made mistakes as they ordered inventory earlier this year. Overstocked retailers have to offer discounts to clear out items. This means sales that are favorable to shoppers as retailers clear items for which there has been little demand.
Finally, some retailers are already in deep trouble. Among these are Bed Bath & Beyond, Gap, and JCPenney. Their sales will need to be spectacular to improve their financial condition.
It won’t be long before the debate about how brisk holiday sales have been. There are only 21 days left until Christmas.
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