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A ‘unique’ holiday ahead for America’s retailers.
With just a few days left in October, a great American tradition draws nearer — holiday shopping.
And while 2020 has been a strange and difficult year in many ways, Wall Street economists still expect consumers to open up their wallets in a big way this holiday season.
“In what undoubtedly will be remembered as one of the most challenging and transformative years for most retailers, we are forecasting holiday sales will increase 9% in 2020, which would be the largest increase on record,” said Wells Fargo economists led by Tim Quinlan in a note published Monday.
“A forced thrift that has curtailed spending in the service sector and canceled travel plans frees up income for more spending on gifts,” the firm adds. “After the anxiety and stress of a year defined by the virus, natural disasters, and a divisive election, we suspect holiday sales will also benefit from a yearning for comfort and normalcy, which many consumers may associate with having a few more gifts under the tree.”
Sales in retail categories Wells would consider “holiday sales” — think all retail minus autos, gas, and restaurants — are 8.6% above their pre-pandemic levels while total retail sales are 3.7% above pre-pandemic levels.
And the CEO of the country’s biggest retailer sees similar trends in play during the holiday season.
“Behavior patterns have changed and people aren’t spending as much to travel and take vacations and do things they would have been doing,” Walmart (WMT) CEO Doug McMillon told Yahoo Finance’s Brian Sozzi in an interview during Yahoo Finance’s All Markets Summit held Monday. “Some of that is impacting retail and the categories that we sell.”
McMillon added that he does believe this will be a good holiday season for the retailer, adding that, “It will be a unique, but a good, year.”
But McMillon struck a more cautious tone in talking broadly about the state of the consumer, small businesses, and how things might shake out without fresh stimulus.
“I think the lack of stimulus is showing up more so with with those unemployed, small businesses...I think it’s important that we all understanding in some ways we’re having a shared experience because we’re in a pandemic together, but we’re having a very different experience,” McMillon added. “If you have been let go and don’t have income, you really need help. The voice we have at Walmart is to say to Congress and the administration, ‘We need you to help those people who need help.’”
McMillon, who also chairs the Business Roundtable — an association of American CEOs — added that targeted stimulus at sectors like airlines and hotels is necessary, as are more targeted measures aimed at helping small businesses. Data from Yelp published in September showed nearly 100,000 small businesses have closed permanently since March.
And this as a surge in the virus across the country threatens to forestall the recovery in the labor market that has been so crucial to consumers outperforming expectations.
“In the near-term the rising Covid infection rate across parts of the country presents a risk to further job gains,” economists at UBS said in a note published Monday. “We have seen over time, a negative correlation between private payroll creation and Covid cases.”
So while forced closures have shifted consumer spending towards goods and away from services — offering a nice tailwind for retailers heading into the holiday season — this record year for gift-giving could serve as another strange superlative amid a still-tepid recovery in the U.S. economy.
