An individual walks past a sales commercial at Saks Off fifth department store ahead of the Thanksgiving holiday sales in Washington, D.C., on Nov. 21, 2023.
Saul Loeb | AFP | Getty Images
There is a dark cloud hanging over Black Friday.
A slew of outlets have issued tepid, cautious or downright disappointing fourth-quarter outlooks over the past few weeks, casting a pall over the crucial holiday season right as they gear up for the largest shopping day of the yr.
The businesses, which include everyone from luxury goods giant Tapestry to big boxer BJ’s Wholesale Club, cited a bunch of dynamics that led them to scale back their outlooks or issue forecasts that got here in below expectations.Â
Some, similar to Best Buy and Nordstrom, cited the uncertain state of the buyer following months of persistent inflation, while others, similar to Hanesbrands, said demand is solely drying up for its basic T-shirts, socks and underwear as wholesalers look to maintain inventories in check.
Even Dick’s Sporting Goods and Abercrombie & Fitch, which each raised their full-year guidance on Tuesday after strong third quarters, managed to underwhelm with their holiday forecasts.Â
If there’s one theme that captures the commentary, it’s caution, and while some retailers can have been overly conservative with their outlooks, the resounding insecurity spells trouble for the vacation quarter and raises questions on the general health of the economy.Â
“Consumers are still spending, but pressures like higher rates of interest, the resumption of student loan repayments, increased bank card debt and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs,” Goal CEO Brian Cornell told analysts on a call last week.
“As we have a look at recent trends across the retail industry, dollar sales are being driven by higher prices with consumers buying fewer units per trip. Actually, overall unit demand across the industry has been down 2% to 4% in recent quarters, and the industry has experienced seven consecutive quarters of declines in discretionary dollars and units,” he said.
When asked in regards to the upcoming holiday season, Cornell said it was too soon to weigh in on early sales, saying only that the corporate was “watching the trends rigorously.”
Ho-hum growth for holiday spend
The vacation shopping season over the past couple of years has seen outsize growth brought on by the Covid-19 pandemic, which gave consumers stimulus payments and a chance to pad their bank accounts while they were stuck at home and unable to travel or dine out.Â
In 2020, holiday spend was up 9.1% from the yr prior, in line with the National Retail Federation. In 2021, spend was up 12.7% yr over yr, and in 2022, it was up 5.4%.
As 2023 involves a detailed, savings accounts dwindle and consumers proceed to face inflation and high rates of interest, that growth in holiday spend is anticipated to slow to three% to 4%, in line with the NRF. That is consistent with the slower growth rates seen between 2010 and 2019 within the lead as much as the pandemic.Â
The expected slowdown has led many retailers to approach the vacation season with more caution than Wall Street anticipated.
On Monday, Bank of America’s consumer team found that out of 43 retailers that issued earnings forecasts, 37, or 86%, got here in light of Street expectations.Â
Take Walmart, for instance. The retailer struck a cautious tone with its outlook, which got here in below expectations, after it saw consumer spending weaken toward the tip of October. Last week, it said it expects adjusted earnings per share of $6.40 to $6.48 for the yr, lower than the $6.48 analysts had projected, in line with LSEG, formerly referred to as Refinitiv.Â
“Halloween was good overall,” Chief Financial Officer John David Rainey said on a call with CNBC. “But within the last couple of weeks of October, there have been definitely some trends within the business that made us pause and form of rethink the health of the buyer.”
For some retailers, even excellent news wasn’t cheery enough.
Dick’s Sporting Goods raised its forecast Tuesday after posting strong top- and bottom-line beats and said it now expects full-year earnings per share of between $11.45 and $12.05, compared with the $11.27 to $12.39 range that analysts had projected, in line with LSEG.
But in comparison with its strong third-quarter results, the outlook got here off as tempered.
The retailer said it was “excited” for the vacation but couched that optimism with executives repeatedly noting they were looking forward to the things “inside our control” — a refrain heard 4 times through the hour-long call.Â
“We’re very enthusiastic about what we’ve got inside our control for Q4. Our products are in stock. We have got tremendous gifts … and the teams are pumped to deliver an incredible holiday experience,” CEO Lauren Hobart said on a call with analysts. “We’re balancing all of that with caution in regards to the macroeconomic environment and the buyer, because we all know that customers are going through rather a lot at once. So, I believe, we have been reasonably cautious in our guidance.”Â
— CNBC’s Melissa Repko contributed to this report.
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