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Will Retailers Raise A Toast This Holiday Despite The Glum?

By Zacks Investment ResearchStock MarketsSep 18, 2019 09:33PM ET
www.investing.com/analysis/will-retailers-raise-a-toast-this-holiday-despite-the-glum-200466132
Will Retailers Raise A Toast This Holiday Despite The Glum?
By Zacks Investment Research   |  Sep 18, 2019 09:33PM ET
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Well, you can’t overlook concerns related to trade war, rising crude prices, sluggish business spending and other geopolitical issues that are fueling apprehensions about an economic slowdown. In fact, imposition of tariffs has left some of the retailers with no other choice than to go for selective price increases, while trying not to hurt sales during the holiday season.

However, these factors are enough to dampen the festive spirit of customers, who may curtail their discretionary spending. Well if consumers choose to tighten purse strings, retailers have to tough it out this shopping season. Apart from these, a strong U.S. dollar may hit tourism and a warmer winter may impact the sale of seasonal apparel and merchandise. Again, retailers will get six fewer days between Thanksgiving and Christmas this time compared with last year.

Nonetheless, keeping the concerns aside for a while and going by Deloitte’s recent holiday sales projection, retailers are all set to revel again in the euphoria of the upcoming festive season.

Holiday sales are projected to increase 4.5-5% and exceed $1.1 trillion between November 2019 and January 2020. Meanwhile, e-commerce sales are estimated to improve 14-18% to reach $144–149 billion. Numbers look robust compared with the last year, when sales in December were affected by U.S. government shut down, battered stock market and increase in consumer savings.

Also, a buoyant consumer environment as marked by solid labor market, rise in disposable income and an uptick in confidence index support the data. Undoubtedly, the sector’s prospects are closely tied to the purchasing power of consumers. With consumers feeling confident, retail sales are trending up. Per the Commerce Department, U.S. retail and food services sales advanced 0.4% in August. However, this follows an upwardly revised increase of 0.8% in July. Again, the recent cut in benchmark interest rate by a 25 basis points may ramp up investment activities and reinforce consumer spending.

No wonder the season, which accounts for a sizeable chunk of yearly revenues and profits, is a make or break time for retailers. With only a couple of months left for the festivities to begin, retail bellwethers from Amazon (NASDAQ:AMZN) to Walmart (NYSE:WMT) and from Macy's (NYSE:M) to Gap (NYSE:GPS) are pulling up socks to capitalize on this upcoming season. Target (NYSE:TGT) intends to appoint more than 130,000 seasonal workers to provide an enhanced shopping experience to customers.

Retailers are ready to walk the extra mile to woo bargain hunters, through various means like early-hour store openings, smart promotional efforts and free shipping on online purchases. Additionally, retailers are rationalizing supply chain, improving store-related technology and augmenting ship-from-store capabilities.

The retail companies are deploying resources to enhance omni-channel capacities, introducing brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process during the busiest part of the year. Retailers are even trying to absorb higher costs related to tariffs and keep consumers unaffected.

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Will Retailers Raise A Toast This Holiday Despite The Glum?
 
Will Retailers Raise A Toast This Holiday Despite The Glum?

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