Light Wave


High inflation, rates to dampen holiday spirit for shoppers and sellers

By Jake Beardslee · November 22, 2023

In brief…

  • Retailers lowering forecasts due to economic factors depressing consumer spending
  • Projections of tempered 3-4% holiday sales growth, far below pandemic spikes
  • National Retail Federation cites “less discretionary income” for consumers
  • Target CEO reluctant to comment on holiday trends
  • Bank of America finds 86% of retailers issued disappointing guidance
Retailers are approaching the vital holiday shopping season with uncharacteristic caution instead of optimism in light of numerous economic headwinds facing consumers.  Energepic/Pexels

As we approach the kick-off to the holiday shopping season with Black Friday just days away, a pall of pessimism has descended over many major retailers. A range of companies, from luxury brand Tapestry to wholesale retailer BJ’s, have recently lowered their profit forecasts for the fourth quarter and beyond. They cite economic factors like high inflation, rising interest rates, and declining consumer confidence that have created what Target CEO Brian Cornell called “less discretionary income” for shoppers, according to CNBC.

The trend spells trouble for the make-or-break holiday season. As Dick’s Sporting Goods CEO Lauren Hobart noted, “consumers are going through a lot right now.” Most projections call for holiday spending growth around 3-4%, down from over 5% last year and a far cry from the 9-13% spikes during the pandemic.

The National Retail Federation said “pressures like higher interest rates” and other financial burdens “have left [consumers] with less discretionary income.” The result is “declines in discretionary dollars and units” spent, according to Cornell. Numerous retailers “have experienced seven consecutive quarters of declines.”

When asked about holiday sales trends, Cornell declined to give specifics, saying only that Target is “watching the trends carefully.” That caution permeates the sector. A Bank of America analysis found 86% of retailers have issued lower-than-expected earnings guidance.

Even relatively upbeat reports have prompted guarded optimism. Dick’s raised projections after a strong quarter but reiterated plans to control “what we have within our control” for the holidays. The company said it remains “excited” about the season while “balancing all of that with caution.” The consumer outlook means “we’ve been reasonably cautious in our guidance,” Hobart noted.