Elections and hurricanes affect retail spending

Inflation may have slowed, but retailers are still awaiting the holiday season with a lot of uncertainty.

Many difficult-to-predict factors will influence consumer spending, as they deck the halls and search for the perfect gifts. Volatile weather, election distractions and a bargain-hunting mentality may shape the season. Also, fewer days between Thanksgiving and Christmas than last year will put shoppers on a clock.

However, there is reason for optimism for retailers: Shoppers are feeling more optimistic and plan to spend more compared to last holiday season, according to an annual survey by consulting firm Deloitte and a separate forecast by the National Retail Federation.

Holiday spending in November and December is expected to rise 2.5% to 3.5% from 2023 and range between $979.5 billion and $989 billion, according to the National Retail Federation. That's a more modest increase from the 3.9% annual jump from the 2022 to 2023 holiday season, when spending totaled $955.6 billion. The NRF number does not include auto dealers, gas stations and restaurants.

Shoppers expect to spend an average of $1,778 on the holidays this year, 8% more than last holiday season, according to a Deloitte consulting firm survey. The survey, which included about 4,000 consumers and was conducted in late August and early September, attributed the increased spending to more positive economic expectations, a perception among survey participants that prices would be higher, and an increased willingness to spend among higher-income families who have higher incomes. Annual income ranges between $100,000 and $199,000.

Stephen Rogers, managing director of the Consumer Industry Center at Deloitte, said lower unemployment rates, a return to more typical inflation levels, and the Federal Reserve's recent interest rate cut are all lifting consumer sentiment.

“People are still in a better frame of mind, despite the political chatter,” he said. “When they look at their bank accounts and think about their financial situation, they feel better.”

Weeks before trick-or-treating, shoppers get their first taste of holiday specials.

These early offers set the stage for a season in which shoppers are expected to look for more ways to stretch the budget after the cost of living has risen for years.

Nearly 80% of shoppers surveyed by Deloitte said they would participate in deal events in October and November, compared to 61% last year.

“We have been implementing our agreement to strive for muscle over the past two years and will continue to practice it,” Rogers said.

NRF CEO Matt Shay echoed that prediction. On a call with reporters this week, he said the retail group expects a more promotional environment this holiday season, with deals across more brands and categories than last year.

Another potential challenge for retailers? Catering to customers who focus more on decorations and experiences than gifts. Consumers plan to spend 16% more year-over-year on experiences, but they spend 3% less on gifts compared to last year's holiday period, according to a Deloitte survey. Non-gift purchases, including spending on decor and party clothes, are also expected to jump 9% year over year.

The company's survey found that spending in retail categories will remain relatively flat at an average of $1,043 in 2024 compared to $1,020 in 2023. Consumers across income categories reported value-seeking habits, including less self-gifting, more trade-in All the way to affordable retailers and more. Look for special brands or “dupes” for expensive items.

This shift could hurt retailers who sell goods, Rogers said, unless they come up with compelling ways to connect their merchandise to experiences, such as suggesting hiking gear.

to Home Depotwhich sells a wide range of holiday decor including Santa-themed pillows and giant animatronic reindeer for yards, the high demand for decor may be an opportunity. However, the home improvement retailer said it is ready for consumers to look for value as well.

This holiday season, Home Depot has purchased more artificial Christmas trees at lower prices, such as a pre-lit tree that sells for $49, said Lance Allen, chief holiday decor wholesaler for the home improvement retailer.

As Americans await the results of the presidential election, will they also be shopping for the holidays?

This is a question on the minds of retailers and consumer brands, including… Walmart and SharkNinjawhich hopes shoppers will browse and buy rather than become glued to the news. The election will be held on November 5, and it could take days for a winner to be declared if the race between Vice President Kamala Harris and former President Donald Trump ends up as close as polls indicate.

Mark Barokas, CEO of SharkNinja, called the election “the biggest unknown” that will shape the holiday season.

“It may be just a blip or it may be nothing, and it may hold things up for a few weeks if the news cycle is all-consuming,” he added. “Christmas will come and there will be a holiday season. It's just a matter of how many distractions there are.”

The election and the news cycle surrounding it may also impact how consumers feel about the economy, he said.

Walmart's internal research indicates “an uptick in positivity” as shoppers enjoy fall and prepare for Halloween, said Gene Acera, Walmart's vice president of customer insights and strategy.

“The only thing that is still going to be in play is what happens in the election, and what happens in the election will really determine whether or not this is something that will remain positive,” she said.

Indeed, some companies blamed the election for reducing their sales. Amazon She attributed the weak forecast in August to election distraction that would dampen demand for online shopping, a comment that some mocked as an excuse.

Delta AirlinesCEO Ed Bastian said in an interview with CNBC this month that the company expects lower demand before and after the election, which will impact the carrier's revenue.

“I think consumers are going to take some pause when making investment decisions, whether it's discretionary or other things,” he said. “I think you'll hear other industries talking about it, too.”

For retailers, cold and wintry weather is always on the Christmas wish list.

Weather can get shoppers into the holiday spirit and put them in the mood to buy thicker sweaters, coats and gifts, said Evan Gould, executive vice president of Planalytics, a Philadelphia-based company that advises retailers on weather-related inventory planning.

“There is no external factor that affects consumer purchases as directly, repeatedly and immediately as the weather,” he said.

This year, the fall semester got off to a more difficult start. The unofficial start of the holiday shopping season, marked by October sales events, coincided with unseasonably warm temperatures in San Francisco and other parts of the country, and severe hurricanes that struck North Carolina and Florida. This makes shoppers less willing to buy jackets, coats and artificial trees.

However, Gould said this year's weather should ultimately help retailers, with November and December temperatures expected to be cooler than a year ago. A shift in weather, such as snowfall or a cold snap, can help guide shoppers to prepare for the season, he said.

Many families will just try to rebuild from hurricane damage rather than buy holiday gifts, which could redirect money to furniture, clothing or home repairs, NRF chief economist Jack Kleinhenz said on a call with reporters.

“This will just be an adjustment in their budget in what they're going to spend on, but it's too early to know the full impact on retail,” he said.

Home Depot expects so, too. It has pulled holiday products from 124 of its big-box stores to make room for items that hard-hit areas need, such as shingles and drywall, Allen said. Instead, she plans to sell a limited assortment of items in those stores such as her best-selling wreaths and trees, he said.

“They are trying to rebuild and restore their homes,” he said. “Obviously they're not going to go buy a nine-foot-tall reindeer and put it out there.”

Thanks to the calendar, the holiday rush can come very quickly.

Shoppers will have five fewer days between Thanksgiving and Christmas this year than last — which could reduce spending or motivate time-pressed shoppers to seek express shipping, curbside pickup, or other faster options to get gifts.

The pressure will be on retailers to make the most of each day and offer convenience, NRF's Shay said, as shoppers race to get what they need and expect items to arrive within a few hours or, at the very least, within a few days.

“A shorter period has consequences and repercussions, one of which is of course that the shipping season will be shorter,” he said.

On a recent store tour, Christy Raymond, Kohl's chief marketing officer, said the retailer expects it will have to work harder to attract customers, especially low- and middle-income shoppers, who have felt pressured by the cumulative impact of inflation and time constraints.

“We think they are feeling more pressure than last year,” Raymond said. She added that shoppers also said they were “feeling pressed for time.”

To attract these consumers, Kohl's wants to have more of what they want, said Nick Jones, chief merchandising and chief digital officer.

The retailer has increased its gift offerings, added more party dresses and started selling a wider range of decorations, including Christmas trees, lawn ornaments and wrapping paper.

“We want to be a vacation destination,” he said. “We don't have food, but we have everything else.”