U.S. consumers sifted discounted merchandise for bargains during 2022's first holiday shopping weekend as early indicators pointed to resilient demand despite high inflation and recession worries.
- Early holiday sales data indicated year-over-year growth above estimates.
- Inflation has hurt shoppers' spending power and is driving this year's focus on bargains and value.
- Shares of Walmart, Target, and Amazon rose on Cyber Monday as the major averages slid.
- Wages have offset some of inflation's toll, and consumers are also taking on more debt while depleting savings.
Shares of leading discounters Walmart (WMT) and Target (TGT) gained modestly Monday, as did those of electronics chain Best Buy (BBY). Amazon (AMZN) rose as well amid Cyber Monday promotions. Department store stocks Macy's (M), Nordstrom (JWN), and Kohl's (KSS) fell.
Black Friday shopper foot traffic rose 2.9% from 2021, according to data from Sensormatic Solutions. Online spending on Black Friday was up 2.3% year-over-year, according to Adobe Analytics, and gained 12% based on Salesforce data. In both cases, online spending surpassed earlier projections.
Black Friday retail spending online and at stores rose 12% from a year earlier according to Mastercard SpendingPulse data excluding auto sales and including the 21% year-over-year surge at restaurants.
BofA: Early Shopping Indicators 'Slightly Positive'
"We would characterize early Black Friday data as slightly positive for the sector, and we continue to expect 4Q to be a little more back-end loaded than last year due to prior year inventory issues," Bank of America analysts wrote in a research report.
The National Retail Federation projects holiday spending growth of 6% to 8% this year in nominal terms, before adjusting for U.S. inflation of 7.7% over the past year.
Inflation has been particularly hard on lower-income consumers, several retail chains noted in earnings reports released last week. Those consumers are expected to hold out for steeper markdowns ahead of Christmas. The average discount rate in the U.S. was 31% on Thanksgiving Day, up from 27% last year, according to Salesforce data.
On Friday, Best Buy drew shoppers with offers of Chromebook laptops starting at $79, while Gap's (GPS) Old Navy chain lured buyers with a storewide discount of 60%. In another sign of this year's value-seeking trend, Walmart displaced Amazon as the top retailer for online searches of Black Friday discounts, with Target and Kohl's also squeezing ahead of Amazon's ecommerce marketplace.
Consumer Spending Props: Jobs, Wages, Savings, Debt
Hopes for holiday shopping hinge on economic positives that have been overshadowed by high inflation and Federal Reserve rate hikes meant to tame it. Those strengths include:
- The unemployment rate, at 3.7%, remains near multi-decade lows.
- Wages and salaries have increased about 5% in nominal terms over the past year, offsetting the bulk of inflation's bite for many consumers.
- U.S. households continue to draw down personal savings, and while that trend may pose longer-term risks, saving tends to increase, not drop, ahead of recessions.
- Consumer borrowing continues to rise despite the higher interest rates.
Some of those positives may turn into negatives down the line, but for the moment they're propping up forecasts for holiday shopping and retailers.