US retailers prepare for a muted Black Friday

US RETAILERS are bracing for a slower-than-normal Black Friday as high inflation and sagging consumer sentiment erode Americans’ demand for material goods. 

After adjusting for inflation, seasonal sales are likely to fall 1.2 per cent, the first decline since 2009, according to S&P Global Market Intelligence.

At the same time, there’s a lot of nuance to be gleaned from companies’ earnings reports in recent weeks. It’s clear that shoppers are willing to fork out cash, if the price is right.

A buildup of inventory has forced companies into widespread markdowns – a move that hurts profits but appears to be drawing in discount-hunting consumers.

At the same time, companies from Nordstrom to Kohl’s have noted weaker performance in late October and earlier December. If that trend continues, a stock rally that has bolstered the industry in recent weeks could prove short-lived. 

A key question this Black Friday will be how much higher prices are contributing to better sales numbers.

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Overall spending this holiday season is seen growing 2.5 per cent from a year ago, compared with 8.6 per cent last year and a whopping 32 per cent in 2020, according to data from Adobe. Those figures aren’t adjusted for inflation, meaning that sales could be down by volume given that consumer prices are up 7.7 per cent from a year ago.

Success for retailers this holiday season will be determined by which companies can maintain their discounts and still come out profitable, said Dana Telsey, chief executive officer of Telsey Advisory Group, in a Nov 23 interview on Bloomberg Television. There’s still more inventory “to get through as we enter the holiday season, which is going to lead to good deals and good values for the consumer,” she said.

Telsey also said that brick-and-mortar sales are likely to get a big boost this year because “we have not had this type of in-person shopping for two years during the holiday season” due to Covid-19. BLOOMBERG