With Christmas 2022 just around the corner, many are left wondering how they will afford to give their families a great Christmas. One of the greatest indicators for the holiday season is the National Retail Federation (NRF) forecast.
The report showed a growth of 6% to 8% in U.S. holiday sales for 2022, with estimates between $942.6 billion and $960.4 billion. By comparison, in 2021, holiday sales grew 13.5% and totaled $889.3 billion. While retailers can’t expect banner years like 2021, 2022 also had a much stronger base year.
BREAKING: Doctors Can't Believe She Used This To Erase Her Wrinkles...
With gas, food, utilities, and other recurring expenses skyrocketing, forecasters aren’t ready to throw another log on the fire and start passing the eggnog. Especially as credit card and mortgage rates continue to spike and impact budgets. With consumer confidence plunging on the heels of the November IBD/TIPP Economic Optimism Index, it’s not a good sign.
According to that Index, confidence went from 41.6 in October to 40.4 in November. Any index spending 15 months going down is not a good sign for American consumers or the markets. For this index specifically, anything above 50 shows signs of optimism, and below 50 is pessimism. Also in that report, 71% indicated that they would reduce their travel for the holidays, and 73% would be reducing holiday-related long-distance travel.
The holiday outlook report showed consumers expect to be spending $1,430 on gifts, travel, and entertainment this year. By comparison, last year they spent $1,447, so this decrease in spending is indicative of how sharply inflation is impacting holiday gift-giving. With many expecting to spend even less, merchants will have a difficult time attracting customers.
Traditionally, holiday shopping has made up 30% of all annual retail sales. Places like Wal*Mart, Macy’s, Target, and even Costco depend on the holiday season to boost annual revenue and profit margins. Those who invest in these companies as well as large online shopping places like Amazon look to the holidays for a significant profit in trading. This year, those hidden gems look to pay off far less than in years past.
Bank of America Securities analyst Robby Ohmes expects to see the companies he covers see just a 1.3% increase this year. Last year it was a remarkable 6.5%. “Inflation is the Grinch. Inflation makes it challenging to forecast sales — everything is more expensive than last year. (Because of higher prices) you could have weaker unit sales but higher dollar sales.”
This message sounds reassuring to some, but these volume-driven sales are what drove this surge in profits over the years. Stores are consistently trying to undercut the competition or provide consumers with extra reasons to shop with them. Given the inflation rate and the trimming of gift lists by people due to inflation, there likely won’t be the same spike in spending many were expecting.
One group will be keeping the retail season in check, and that’s the millennials. One of the only groups to be reporting an increase in spending, they are forecasted to increase their gift, travel, and entertainment budgets by 11% compared to last year. As a large portion of the “quiet quitting” movement, this group has been challenging the statuesque by looking to only do what they are being paid to do and looking for better work if they feel as though their current employer isn’t giving them their due. A massive shift like this has greatly disturbed the business models American companies have operated on for decades.
TRENDING: Men Try This Tonight - You'll Never Need The Pill Again
For this group, their top two gifts are the same ones they grew up getting: apparel and gift cards. Apparel is a staple product, and with numerous craft or low market share companies being born out of COVID-related lifestyle changes, it makes a natural and personal choice. Meanwhile, gift cards don’t diminish in value, even when the buying power dips. Finally, millennials are making good decisions, and are part of the solution.