Holiday retail sales growth to slow as consumers spend cautiously on non-necessities, national group forecasts

Holiday retail sales this year are projected to have the slowest growth since 2018 as consumers spend cautiously amid elevated interest rates and concerns about inflation, according to a national retail forecast.

The healthy jobs market and wage growth are generally outpacing slowing inflation and support consumers’ capacity to spend during the holidays, but consumers will be cautious, particularly when buying non-necessities, National Retail Federation President and CEO Matthew Shay said during a holiday sales forecast call with media Tuesday.

“We’ve all seen that consumers have become a bit more moderated in their spending patterns, a bit more cautious. Lingering inflation, particularly on the services side, continues to cause consumers and households to make thoughtful decisions about their spending priorities,” he said.

Retail spending in November and December is expected to grow between 2.5% and 3.5% to between $979.5 billion and $989 billion compared to the to $955.6 billion spent during the two-month period last year, according to a forecast the NRF released Tuesday.

Last year, holiday sales increased 3.9% from the 2022 season.

In 2018, holiday sales grew 1.8%, but this year's NRF forecast is in line with the pre-pandemic average annual holiday increase of 3.6% from 2010 to 2019, according to the Washington, D.C.-based trade group, which does not adjust its numbers for inflation.

One issue that might affect when consumers spend is the holiday shopping period between Thanksgiving and Christmas being shortened to 26 days, which is six days fewer than in the period last year, the NRF said.

Looking at price tags

While overall inflation has fallen below 3% in recent months, consumers are still feeling the pinch of higher prices, said John Mercer, head of global research in the London office of Coresight Research, a Manhattan-based retail analysis provider.

“Consumers don’t look at the rate of inflation. They look at the price tag being about 22% higher than pre-pandemic,” he said.

This holiday season, consumers are expected to continue pulling back on spending on home goods because of the weak housing sales market; other big-ticket items, such as electronics and appliances; and high-end items as aspirational shoppers have trimmed their luxury spending, he said.

One retail segment that will see spending increases is apparel, where shoppers have grown their spending above the rate of inflation, Mercer said.

At Flipflopogram, a women’s clothing and accessories store in downtown Amityville, sales in 2024 have been strong thus far, said owner Kathy Cruthers, who added that she expects new customers to support a strong holiday shopping season.

“My longtime customers are not spending the way they used to, but the new customers are coming and spending. And it might just be a one-hit wonder because I’m new to them, but I’m not sure,” she said.

Budget-conscious holiday shoppers will be on the hunt for more deals this year.

But some national retailers, including Gap, Kohl’s, Williams Sonoma and The Home Depot, cut their inventory levels in the fiscal second quarter this year, so they will feel less pressure to offer promotions this holiday season, Mercer said.

Lynbrook-based retailer Mixology Clothing Co., which sells mostly women’s clothes at 17 stores in the metro area and South Florida, typically orders a larger amount of inventory annually as the business grows. But this year, the company ordered the same amount as last year “out of recognition of global macro events” such as unrest in the Middle East, inflation and uncertainty over the presidential election year, said Jordan Edwards, chief executive officer.

The retailer's sales in general are strong this year, considering those factors, he said.

“We’re about even [in sales] in most stores, up in a few,” Edwards said.

This holiday season, Mixology will offer the same number of promotions as it did last year — three — for Black Friday, Small Business Saturday and Cyber Monday, Edwards said.

Getting help

The past few years, employers faced intense competition to recruit seasonal workers, who were able to jump from gig to gig pursuing higher wages, said Andy Challenger, senior vice president at Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm.

This year, employers are expected to hire fewer seasonal workers because the labor market, while steady, is cooling, which will make it easier for employers that are hiring to fill temporary positions, he said.

In the last quarter of this year, retailers are projected to hire 520,000 seasonal workers, an 8% decline from the 564,200 added in the same period last year and the second-lowest total since 2009, according to a Challenger analysis of data from the Bureau of Labor Statistics.

This year, Burlington Stores plans to hire 1,500 full-time and 23,000 part-time seasonal workers, while discount grocer Aldi will hire 13,000, Challenger reported.

Jericho-based 1-800-Flowers.com Inc. is hiring nearly 8,000 seasonal workers nationwide across its portfolio of brands, including Harry & David, Cheryl’s Cookies and PersonalizationMall.com, according to Tom Hartnett, president.

“Our hiring remains on par with last year as we anticipate a strong holiday season,” he said.

By Tory N. Parrish

tory.parrish@newsday.comToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.