Holiday 2022 Retail Outlook: The Strong Get Stronger
As the fourth quarter of 2022 kicks off, retailers that have so far been weathering the tumultuous economy look poised to emerge victorious when all the beans have been counted. Conversely, this holiday season may be the one that finally removes some former leaders, especially those (eg, Bed Bath & Beyond) who have been besieged by activist investors eagerly awaiting change.
The key driver of this year’s challenges comes as no surprise: inflation.
A recent survey of 1,000 consumers Per 4Over, a producer of print materials for the retail industry, found that about 6 in 10 shoppers “are stressed about buying holiday gifts this year due to inflation.” Three out of four expect prices to rise further this fall. But the key takeaway might be that nearly half of Americans told the researchers that this year, “paying full price for something is a deal breaker.”
The latest First Insight report, The State of Consumer Spending: The International Impact of Inflation found that more than eighty percent of international consumers are less confident to spend amid persistent inflation.
As a result, the winners will likely be those familiar brands associated with aggressive pricing on consumer staples (Walmart, Costco, BJ) and Amazon. I would add The Home Depot to this list. While consumers have been spending less than they were during the pandemic, The Home Depot managed to outperform competitor Lowe’s by strengthening its relationship with contractors. Home Depot may also benefit from Lowe’s self-inflicted wounds.
The list of possible stragglers this holiday must include Bed Bath & Beyond, stalked by Wall Street sharks. Bed Bath & Beyond’s problems have been well documented in these columns. In the past two months, the company has closed about 150 stores, laid off some employees, fired the CEO, and most recently reported a 28% quarterly sales drop. There are no signs of a change.
From my point of view, the final sprint of the retail year seems to be doing well, not a disaster and definitely not a great success.
Most experts speak of modestly higher year-over-year revenue, primarily attributable to higher prices compared to unit sales growth.
Meanwhile, consumer confidence, which by some measures has perked up a bit recently, is shaky and volatile. Rising gasoline prices helped bring it down in the summer, and falling prices improved the economic environment.
But there is always a side effect when interest and mortgage rates rise as they have. As the real estate market begins to stagnate and prices recede, many homeowners who thought they were sitting on a treasure chest of capital will feel much less satisfied.
A dull holiday this year will probably instill some confidence in the industry, but the real test will come in the first quarters of next year, when the real estate downturn becomes an accepted new normal, the midterms are behind us, and the news is out. full of speculation about 2024. Finally, let’s not forget about inventory and the issues that arise from the bullwhip effects of inventory movement throughout the supply chain.
Clearly, retail is not for the faint-hearted investor or leader. So, buckle up…it should be an interesting 2023.
