INFLATION PERPLEXES HOLIDAY SALES ANALYSTS, MUDDYING ’23 FORECASTS
There’s still no consensus about the pace of retail sales during the Black Friday weekend, an unusual outcome that is driving disparate forecasts for the rest of the holiday shopping season and creating uncertainty for investors and analysts heading into next year.
Companies use a variety of metrics to tally sales or track different retail sectors, but past figures have typically shown similar trends. “This is the most inconclusive year for Black Friday and holiday data that I’ve seen,” said Melissa Minkow, director of retail strategy at digital consultancy CI&T.
Salesforce, for example, said U.S. sales online were up 10 percent from Thanksgiving through Cyber Monday this year versus last to $52 billion. But Adobe says online sales were only up 4 percent to $35.3 billion for that period.
There appears to be some agreement emerging that sales growth was minimal during the start of the holiday shopping season, Minkow said. But some say growth was due to inflation, while others say inflation varies by category, making the impact difficult to know. Most of the data sets that track retail sales are not adjusted for inflation since they were launched years ago when U.S. inflation was muted. In November, the inflation rate was 7.1 percent.
Salesforce says high inflation explains most of the increase in Black Friday online retail revenue, so actual sales growth would have been roughly in the low single digits. Meanwhile, Adobe says its own analysis shows that ecommerce prices fell slightly in November so that “strong consumer spending” that month was “driven by net-new demand and not simply higher prices.”
“The economy is in a state that is so confusing to everybody,” Minkow said. Even a slight decline in retail sales should be considered a “win” because of how high inflation has been and concerns about a U.S. recession next year, she said.
There’s also conflicting data about results in physical stores during the Black Friday shopping weekend. NPD Group said instore sales fell 5 percent, in line with data from location-analytics firm Placer.ai that showed a decline in foot traffic, particularly at U.S. department stores. However, the National Retail Federation, a trade association, says traffic was up 17 percent in the five days from Thanksgiving to Cyber Monday.
The NRF is forecasting online and in-store sales growth between 6 percent to 8 percent versus the prior year and says that inflation won’t chip away at that expansion. “Our expectation is that we will have real, inflationadjusted, growth for the holiday season,” the group said in a statement.
Taken together, the data differences are muddying the picture for the final stretch of the holiday shopping season — and into 2023.
More so than in past years, “retailers don’t know what their first quarter and second quarter will look like,” said Matt Katz, managing partner at consultancy SSA & Co. “Most leaders have been living through 7 to 10 years of growth.
We’ve entered a different period.”
The retail industry’s performance over Black Friday showed that consumer demand for apparel, accessories and other items was weakening, said a team of UBS analysts led by Jay Sole. That trend worsened in the subsequent weeks.
U.S. consumers’ willingness to spend shrank nearly 16 percent in December versus the same period in 2019, the analysts said in a research report published this month. That’s the biggest decline since the Covid-19 crisis began and the weakness is happening across all income demographics. Fewer consumers say they are saving enough and more feel “insecure or very insecure financially,” Sole said.
“We also see elevated risk the U.S. Federal Reserve’s interest rate hikes will prove more harmful to consumer spending than anticipated,” Sole said. For the apparel and accessories industries, he added, the new data points signal that “sales trends will deteriorate.”