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May 23, 2024

Retailers Enjoy Brisk Holiday Sales Despite Economic Uncertainties

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Dec 26, 2023

Overview

Despite high inflation and concerns about a potential recession, retailers saw strong sales and foot traffic on Christmas Eve and Christmas Day this year. Many major chains and stores remained open for last-minute shoppers looking to grab gifts or holiday meal items. Consumer spending has held up better than expected, providing a much-needed boost for retailers.

Key details:

  • Major retailers like Walmart, Target, and CVS stayed open with reduced hours on December 25th. Grocery stores saw high demand.
  • Restaurants and fast food chains were also generally open to cater to holiday travelers and gatherings.
  • Experts say higher wages and savings from the pandemic helped consumers afford gifts and holiday splurging.
  • Retail sales in November and December increased over 8% from 2021. E-commerce also showed resilience.
  • The strong finish caps a busy holiday shopping period and gives struggling chains a profit boost.

Retailers Reap Rewards of Strong Holiday Season

U.S. retailers across the country enjoyed robust sales and store traffic over the critical year-end holiday period encompassing Black Friday, Christmas Eve, and Christmas Day. Many major retail and grocery store chains chose to open on December 25th, a Sunday this year, to capture spending from last-minute shoppers.

“We saw very strong sales and demand throughout the season, especially the week leading up to Christmas,” said Walmart CEO Doug McMillon. “Customers were still out shopping right up til Christmas Eve.”

The National Retail Federation (NRF) reported that over 166 million Americans shopped either in-stores or online from Thanksgiving Day through Cyber Monday this year. Shoppers also spread out spending earlier, trying to avoid supply shortages and shipping delays which impacted last year’s holiday season.

“higher paychecks and substantial savings from the pandemic encouraged people to spend more on gifts, holiday items and experiences with family and friends,” explained Katherine Cullen, NRF senior director of industry and consumer insights. “This helped many retailers recover from a slower than expected start to the season in October and November.”

Why Did Consumers Spend More This Season?

In the face of 40-year high inflation rates, why did consumers show the willingness and ability to spend more this holiday season? After all, rising prices for food, fuel, and housing over most of 2022 led many economists to predict that weaker holiday retail sales.

There appear to be several supporting factors:

Higher Wages

  • The job market remains resilient despite high inflation and market volatility
  • Wage growth accelerated over 2022 to keep pace with inflationary pressures
  • Average hourly earnings rose 5.1% over November 2021 as of November 2022

Pandemic Savings Cushion

  • Stimulus checks and reduced spending during COVID lockdowns led to higher cash savings
  • U.S. household cash balances remain about 15% above pre-pandemic levels
  • Above-average household savings provided a buffer against inflation

Pent-up Demand

  • Consumers likely had 2 years of deferred spending needs after subdued 2020-21 holidays
  • With more confident financial positions and jobs, households loosened purse strings

Growing Credit Usage

  • More consumers resorted to credit cards or “Buy Now, Pay Later” financing this season
  • Provided headroom for spending despite inflationary pressures

Christmas Day Operations

While the vast majority of retailers close on December 25th for the federal Christmas Day holiday, many major chains maintained special holiday hours to capture last-minute shoppers.

Convenience stores, pharmacies, and grocery stores saw some of the highest demand given forgotten ingredient needs for holiday meals and medication purchases.

Here were some notable retailers that opened on Christmas Day this year:

Store Christmas Day Hours
Walmart Closed or Reduced Hours
Target Closed
Costco Closed
CVS Reduced Hours
Walgreens Regular Hours
Kroger Reduced Hours

Coffee chains like Starbucks, fast food chains like McDonald’s and Subway, and certain restaurant chains also operated on December 25th to cater to holiday travelers and group gatherings.

“We definitely see an uptick in customers on holidays like Christmas Day,” noted a Houston Walgreens store manager. “People stop in for last-minute ingredient and medication needs traveling to gatherings.”

E-Commerce Resilience

In contrast to suggestions that consumers would pull back on discretionary spending given inflation, online shopping also showed unexpected resilience this holiday season.

According to Mastercard SpendingPulse retail data, U.S. e-commerce sales grew over 11% from Nov-Dec 2021 aided by expanded services:

  • Retailers like Walmart and Target focused on increasing delivery speeds through fulfillment centers and partnerships
  • Chains enhanced buy online, pick-up in store capabilities
  • Flexible return policies and gift card incentives drove digital sales

“E-commerce sales remained strong as retailers made sure to provide ample selection across sought-after categories like toys, beauty, and apparel,” explained Steve Sadove, Mastercard senior advisor. “Retailers also ensured consumers didn’t pay prohibitive last-mile shipping fees.”

Last-Minute Supermarket Demand

Grocery stores and supermarkets faced particularly high demand on Christmas Eve and Christmas Day for ingredients needed for holiday gatherings and meals.

While many grocery chains reduced hours or closed for Christmas Day this year, some locations remained open for desperate shoppers:

  • Hy-Vee posted holiday hours but had select locations open
  • Fareway and Southeastern Grocers closed all stores
  • Kroger and Albertsons operated reduced hours

“We definitely get customers frantically coming in on Christmas Eve saying they forgot key ingredients like gravy mix or veggies,” said Kroger store manager Michelle Brown. “This year seemed busier than ever trying to meet the last-minute demand.”

Beyond groceries, liquor stores, gas stations, and convenience shops also saw holiday traffic from shoppers. Regional convenience chain Wawa kept nearly all locations open 24 hours.

What’s Next?

The strong holiday retail season brings optimism as struggling chains close the books on 2022. But uncertainty still looms large going into 2023.

On the positive side, higher household savings, rising wages, and resilient consumer spending could support future growth. Unemployment also remains near 50-year lows.

However, if inflation persists or worsens, consumer resilience may reach its limits. And economists caution that rate hikes or market factors could tip certain sectors like housing into deeper declines.

For now, retailers are enjoying the holiday spoils while bracing for potential consumer pullbacks if the inflationary environment worsens. Agility and caution will be key in the new year.

AiBot

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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