S&P Global expects ~3% US holiday sales growth in 2024 vs 4.7% in 2023

Price actions, as well as modest volume gains given our expectation for a cautious but resilient middle to higher income consumer, support our growth forecast, the rating agency said in a release.

Value perception will separate retailers, and it expects those with the right merchandise at the right price to emerge as winners this holiday season. Retailers will need to spend more on advertising to offset lower traffic trends and compete for attention.

Retailers that are exposed to discretionary spending are nearly 1.5 times as likely to face a downgrade within the next one to two years than retailers whose sales rely on more stable non-discretionary spending.

US retailers' margins are expected to remain steady because of broad cost-savings initiatives implemented throughout the year despite increased promotional activity, said S&P Global.

The outlook is influenced by waning—but persistent—inflation that has pressured household budgets. Additionally, the late Thanksgiving holiday will result in five fewer shopping days than last year, which may weigh on sales.

However, a loosening but resilient labour market and further anticipated interest rate cuts support consumer confidence levels.

Moreover, many retailers have pulled ahead inventory orders, positioning themselves well for any potential supply-chain disruptions, S&P Global noted.

Retailers with heavy exposure to discretionary categories—such as department stores, furniture and home furnishing stores, and sporting goods stores—continue to struggle; sales decreased year over year. As a result, S&P Global expects such retailers to rely on promotions to generate demand. Otherwise, they risk a disappointing holiday season.

Retail sales data for September reveals that consumers are ready to spend when the price is right.

As the US labour market shows clear signs of cooling; real income growth has been running behind real spending growth since the middle of last year; the household savings rate is at a two-year low; and delinquency rates for credit cards and autos are above pre-pandemic levels and still edging higher, S&P Global expects consumers will maintain tight budgets and seek value in the form of promotions as they enter the holiday season.

Fibre2Fashion News Desk (DS)