Even as consumer confidence hits lows not seen since April, holiday shoppers are still opening their wallets. Jharonne Martis, Director of Consumer Research, LSEG explains what’s going on.
00:00:00 Introduction
00:00:18 — Spending vs. Low Confidence
00:01:22 — What’s Driving Sales Growth?
00:02:14 — More Holiday Deals?
00:03:27 — What Consumers Buy
00:04:45 — Retailers: Best & Worst Positioned
00:06:16 — Why Some Retailers Win
00:07:14 — Gap & Banana Republic Strategy
00:08:07 — Earnings Season Winners
00:09:09 — Full-Price vs. Deal Hunting
Transcript:
Caroline Woods
Joining me now is Jharonne Martis, Director of Consumer Research at LSEG. Jharrone, always good to have you. Thanks for joining me here at the Desk.
Jharonne Martis
Thanks for having me.
Caroline Woods
All right. So the retail earnings continue to come in. Consumer confidence keeps falling but consumers keep spending and they’re spending big. What are we missing here. Explain this disconnect to us.
Jharonne Martis
Well affordability is the headline theme this year. And so what we’re seeing is that for the most part in 2025, the amount of merchandise on sale, which is called this penetration, has been the lowest it’s been even since pre-pandemic levels. Now, what happened is that in the month of November, we saw a spike in the amount of merchandise.
Jharonne Martis
And as a result, that definitely lured in the shoppers to spend more than expected because of those promotions that they hadn’t seen as much in the previous months. This, like I discovered in a collaboration with Centric Market Intelligence. Now, having said that, when we look at the holiday season, Elsa is forecasting about a 2.5% increase compared to a year ago in sales for the holiday season, which is below the 3 to 5% range that we’ve seen over the past couple of years.
Caroline Woods
So sales are expected to grow, but less than previously expected. Our sales growing because of inflation, because things are getting more expensive or because people are actually buying more?
Jharonne Martis
Both. So we’re seeing that the consumer is, spending right now that they did that for the month of November during the holiday season. They’re being very strategic when they’re opening up their wallets like during times like Prime Week, where not only Amazon but other competitors also offer discounts. They’re doing a lot of price comparisons on their phone.
Jharonne Martis
We’re dealing with a very discerning consumer that is constantly price comparing to see how they can get the best value for their money. On the same time, we’re seeing that retailers are warning us not to expect too much from them for the holiday season. They’re actually we’ve actually received more negative guidance than positive. Going into the fourth quarter, as consumers, as the retailers continue to be a little bit cautionary with how things are changing with tariff policies and also demand driven by the consumer, since they are so, value oriented right now.
Caroline Woods
Is that because can retailers know that the best of the sales have already happened and they won’t be luring consumers in with additional sales?
Jharonne Martis
So we still have a couple of days before a couple of weeks before Christmas. And one thing we know about the U.S. consumer is they love to procrastinate. And so retailers still have an opportunity to continue to lure those shoppers in, but they have to be strategic on how they do, those discounts. And we’re seeing that one particular retailer that stands out is Dillard’s.
Jharonne Martis
According to our star My data, they are likely to beat earnings and post a positive surprise. And the reason why Dillard’s is so good is because they have a loyal customer following in comparison with the other department stores they have on trend merchandise that resonates well. But on top of that, they do timely promotions, just enough to alert those shoppers in, but not hurt gross margins.
Jharonne Martis
In general, the retailers are becoming more, strategic when it comes to pricing discipline and also inventory management. And this is mainly because of how they wanted to affect demand, like they still want to attract shoppers, they want to stay relevant, but they are being more conservative when it comes to their margins.
Caroline Woods
Okay. So let’s talk about what consumers actually are spending money on. We know groceries and essentials because we have to spend money on that. But in terms of discretionary purchases, what are consumers buying and where are they going.
Jharonne Martis
So we’re analysts polled by tech have been raising earnings estimates for especially the discounters like Costco, Walmart and off price retailers like TJX.
Subscribe |
Earn. Live. Invest. |
TheStreet Pro |
#consumer #holidayshopping #spending
source
