From Fortune · Phil Wahba · · 2m
Retail CEOs see holiday paradox: anxious shoppers still spending
U.S. consumers say they're worse off and should spend less, yet holiday sales are forecast to rise 4% to 7% as shoppers hunt for deals.
In brief
U.S. consumers say they're worse off and should spend less, yet holiday sales are forecast to rise 4% to 7% as shoppers hunt for deals. Retail CEOs report U.S. consumers are anxious about inflation and economic conditions but continue spending through the holiday season, driven by low unemployment and bargain hunting…
CEOs face a spending puzzle
Retail leaders are trying to predict whether U.S. customers will maintain their shopping pace through the holiday season despite political and economic turmoil, or finally pull back.
Consumers are distressed by inflation
Dollar General CEO Todd Vasos told a Goldman Sachs retail conference that customers across all income levels are somewhat distressed, especially from sustained inflation.
“What we've seen in this economy is a customer across all cohorts of income levels being somewhat distressed, especially in sustained inflation.”
Yet spending is forecast to rise
Consulting firm AlixPartners predicts holiday season sales will rise four to seven percent, even as fifty-seven percent of Americans say they are worse off than a year ago.
The contradiction explained
Shoppers know they should tighten budgets given current events, but they still have money to spend and are instead focusing on squeezing more out of each dollar through deals.
Dollar General sees trading down
Vasos says households making one hundred thousand dollars or more are trading down to Dollar General from competitors like Walmart, while lower-income customers make more visits but buy less.
Retailers adapt with agility
Macy's CEO Tony Spring is investing in stores, adding floor staff, fine-tuning merchandise, and improving supply chain flexibility. Dollar General is ramping up its selection of one dollar items.
Uncertainty demands flexibility
Spring said there is no straight line forward given inflation risks and too much uncertainty, so retailers are focused on serving customers while operating with required agility.
“There is no straight line unless you can tell me there won't be an inflation increase. There's way too much uncertainty, so we are focused on serving the customers.”
CEOs yearn for stability
Boot Barn CEO John Hazen said the biggest question weighing on CEOs' minds is how to manage everything going on, with diesel prices, oil, war, interest rates, and the Fed.
“Everything going on, with diesel prices, oil, a war, interest rates, the Fed. Pick your topic.”
In short
Retail CEOs report U.S. consumers are anxious about inflation and economic conditions but continue spending through the holiday season, driven by low unemployment and bargain hunting.
