The retail industry's report card for the important year-end sales season is out.
U.S. shoppers spent more than expected in November and December, surprising analysts, economists and even retail executives. But a closer look reveals that not all retailers are benefiting.
Retail sales during the holiday season rose 4% from a year earlier, according to Commerce Department data. Purchases of cars, clothing, and electronics contributed to the increase in sales.
Over the past week or so, some retailers have been reporting how their business is doing during the holidays, with more reporting expected in February. Target's total sales rose nearly 3% in November and December from a year earlier, and sales rose even more as people added more clothing and toys to their shopping carts. Abercrombie & Fitch said sales exceeded expectations and is expected to grow 7% to 8% during the 2023 holiday season.
Lululemon, which makes $98 leggings and other sportswear, said it expects fourth-quarter sales to increase 11 to 12 percent. “I still think consumers are healthy,” Lululemon CEO Calvin McDonald said in an interview.
But for some retailers, customers don't seem to be in the mood to splurge.
Signet Jewelers, which owns Kay Jewelers, Zales and Jared, said its fourth-quarter sales will fall by up to 2.5% after sales in the days leading up to Christmas were lower than expected. Signet's chief financial and operating officer, Joanne Hilson, said in a statement that when it comes to “fashion gifts,” customers are “more attracted to lower price points than expected,” and the company is looking to find out what shoppers are looking for. He said it was not providing enough.
Macy's warned analysts in December that customers were holding back, but said fourth-quarter sales were roughly flat. The company has been closing 66 of its 479 stores from Philadelphia to Sacramento over several months and plans to close more by 2026. But the company said it is seeing similar sales growth at Macy's stores, which it views as its future. Bloomingdale's and Bluemercury, the beauty chain it owns.
Macy's isn't the only chain that's shrinking. Kohl's, which has seen sales decline for 11 consecutive quarters, announced it would close 27 “unprofitable” stores by April. The department store chain has more than 1,000 stores.
Starting in 2022, foot traffic and sales slowed as inflation curbed consumer spending and limited shoppers' visits to their favorite stores. The boom that retailers typically bring during the holiday season couldn't save them all.
Last month, a number of struggling retailers declared bankruptcy, including fabric and crafts chains JoAnn, The Container Store and Party City. Party City and Big Lots, which declared bankruptcy in September, have closed all of their stores.
“Even if there was a company that actually prayed for a holiday to save the company, my guess is that it probably wouldn't have saved the company,” said EY, a consultancy with whom he is in frequent contact. Isaac Krakowski, Head of Retail Division, said: with retail executives. “The promotional nature of the holidays probably gave them enough time to hobble around a bit.”
The outlook for the US economy also remains uncertain. Some forecasters expect U.S. economic growth in 2025 to be about 2%, adjusted for inflation, which would be a slight slowdown from 2024's growth of about 2.5%. However, the International Monetary Fund said Friday that it expects U.S. economic growth to accelerate slightly. this year.
Many analysts believe the surprisingly strong holiday season is indicative of what consumer spending will look like in 2025, given the many uncertainties surrounding the incoming Trump administration and the impact fiscal policy will have on purchasing decisions. Reluctant to think.
“There are question marks over whether policies will be announced in January that will make consumers think twice before they spend,” said Mickey Chadha, a vice president at Moody's Ratings. “It could be tariffs, it could be immigration, it could be taxes. There are a lot of different policy changes that could impact how consumers think.”
EY consultant Krakowski echoed similar sentiments.
“I don't think this is indicative of Gangbuster's growth next year,” he said. “We expect cautious growth in 2025.”
