Black Friday has ended. Cyber Monday is hours away. By next week, December will begin. The shopping season has begun, and the runway retailers have to make money has begun to shorten quickly. For some retailer companies, sales will make the difference between strong, mediocre, or poor earnings. Others may not be around next year because they are financially too weak to post disappointing results and then survive. All of these issues will be decided in less than a month. There are only 28 shopping days until Christmas.
Early signs are that holiday sales have not been strong. Based on observations about store traffic, bricks-and-mortar store sales were less than robust. Adobe Analytics measures online sales. Its researchers report e-commerce activity was excellent financially. The figure reached as much as $9.2 billion on Good Friday, a small amount above expectations.
Two factors will weigh on the sales of many retailers. The first is inflation which spiked up early this year. The CPI has been above 8% for many months year over year 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.
The other 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.
Retailers will not know for several weeks if a slowing economy will also slow sales. One theory is that consumers will use credit or savings to keep their spending on gifts healthy.
The largest retailers, led by Amazon, Walmart, and Target, can afford a weak season financially. They have strong balance sheets. They may disappoint investors, but survival is not even close to an issue.
On the other hand, several retailers cannot stay in business next year if they do not post extraordinary numbers. At the head of this list is Bed Bath & Beyond, which already has inventory issues because they have not paid suppliers.
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. In 28 days, the subject won’t be up for debate any longer.
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