What a difference a year makes.
Customer Growth Partners, a leading retail research and consulting firm, foresees a 5.8 percent year-over-year increase in U.S. holiday sales for the November to December shopping season, to $912 billion, up from $862 billion last year.
CGP reported that the dollar figure represents a record, but added that the 5.8 percent growth is just slightly above the 10-year compound annual growth rate of 5 percent and represents “a sharp slowdown from holiday 2021’s stellar 13 percent pace reached in the post-[COVID-19] spending rebound.
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“After stratospheric growth for over a year, consumer spending is easing to near-normal rates in the mid-single-digit range,” said CGP’s president Craig Johnson. “The dramatic deceleration in retail growth is due to rampant inflation across most sectors, but particularly in food, gasoline and household utility costs — all essential goods that are crowding out spending on discretionary items. With discretionary items dominant in the Christmas season, the threat to holiday gift-giving has rarely been higher—particularly for lower-income household that are hard-pressed to weather the inflation winds.”
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Considering inflation is about 8.8 percent, Johnson said there’s actually about 3 percent decline in real retail spending.
Johnson said the slowdown represents “a healthy normalization in retail spending, as consumers rebalance spending on services versus goods. At the same time, retailers are starting to rebalance their operations to reflect the new environment, including trimming bloated inventories, improving supply chain flexibility and optimizing digital and in-store demand. Still, the slower growth shows the sharp effects of food inflation and energy prices in particular — which are estimated to take some $25 billion out of discretionary spending for the holiday period — at the same time that consumer fundamentals are weakening, including slower income growth and plummeting savings rates.”
CGP’s holiday forecast is consistent with other dim projections. Adobe, for example, expects U.S. online holiday sales to hit $209.7 billion during the holiday 2022 season, representing a mere 2.5 percent growth year-over-year, as reported by WWD.
Cowen & Co. gave a dim assessment of the state of retailing, forecasting nominal U.S. holiday 2022 sales, both online and in stores, up 6.5 percent, but considering inflation of about 6 percent, “real” retail sales growth will come in only 0.5 percent ahead. Cowen’s projections exclude food and gas. Deloitte expects holiday retail sales will increase between 4 and 6 percent — 12.8 to 14.3 percent in e-commerce holiday sales — compared to the 2021 season.
For its forecasting, CGP maintains a two-decadelong “big data” retail platform tracking retail spending while also utilizing field research across more than 100 shopping venues across the country involving a field sample of 13,870 interviews with customers and observations in malls and stores. CGP’s holiday forecast spans all retail sales except autos, gasoline and restaurants.
CGP’s holiday 5.8 percent forecast lags its full-year 2022 forecast of 7.2 percent growth, slowing sharply from 2021’s “extraordinary 14 percent growth which was boosted by the post-peak-[COVID-19] rebound and record Federal stimulus payments.”
CGP also predicted that for holiday 2022:
- Home improvement retailers like Home Depot and Lowe’s will outpace other sectors, up 9.5 percent from last year.
- The miscellaneous store category will see 8.9 percent growth, bolstered by strong sales in used goods, pet supplies, office supplies and gifts.
- Food and beverage sales will rise by 8.2 percent, but with inflation in food and other household essentials, growth will be due to price increases as unit volume growth lags.
- General merchandise sales will rise by 4.7 percent, led by department stores, up 5.1 percent.
- Consumer electronics and appliances remains challenged; with a decline of 6.2 percent
- Online and direct-to-consumer sales continue to ease, growing 7.4 percent from last year, “a far cry from the days of robust double-digit e-commerce growth.”
Regarding 2023, “If the worst of the inflationary fires ease in the new year, and job growth continues, retail may well see a return to sustainable growth in the healthy 5 percent to 6 percent range for 2023,” Johnson said.