By Suzanne Kapner
Retailers are looking for Black Friday to reignite tepid demand from budget-minded shoppers, who have been hesitant to spend this year unless they're getting a good deal.
Among the chains that reported quarterly sales gains this past week were Walmart, Gap and T.J. Maxx, a sign that shoppers are willing to spend when they see the right products at reasonable prices.
Executives said shoppers are continuing to pull back on discretionary purchases like clothing and shoes, while spending more on food and other essentials. Although inflation has cooled, prices haven't reverted to prepandemic levels and consumers are still frustrated that they are paying more for many things, including groceries and child care.
The coming Black Friday weekend is less important than it once was now that retailers roll out holiday deals in October to tempt shoppers to buy earlier. But the day after Thanksgiving is still expected to be the busiest U.S. shopping day of the year, according to Sensormatic Solutions, which tracks foot traffic at retail stores.
Retailers that disappointed shoppers in the latest quarter saw their stock price take a hit. Target shares fell 21% in a single day, after the company posted weak quarterly revenue and lowered its profit and sales goals for the year.
"Consumers tell us their budgets remain stretched and they're shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation," Target Chief Executive Brian Cornell told analysts last week.
Walmart, which derives more than half its revenue from groceries, said it was entering the year-end shopping season with momentum, after strong back-to-school and Halloween sales. "Overall, we are feeling good about holiday" sales, said John David Rainey, Walmart's finance chief. But he added that "consumers are still discerning."
Shoppers spent 4% less on clothing, accessories and footwear during the first 10 months of 2024, compared with the same period a year ago, according to Consumer Edge, which tracks spending on more than 100 million credit and debit cards as well as other accounts. One of the few apparel categories to increase was fast fashion, which eked out a small gain as shoppers looked for low-price alternatives, Consumer Edge's data showed.
Gap continued to build on gains at its namesake chain, where sales at stores open at least a year rose 3% in the quarter. Comparable sales at its Old Navy chain, which appeals to more budget-minded shoppers, were unchanged from a year ago. Gap Chief Executive Richard Dickson said lower-income shoppers remained under pressure. Unseasonably warm fall temperatures meant they also had less reason to stock up on cold-weather items.
After a lull in September, retail sales picked up in October. Excluding gasoline, food service and automobiles, year-over-year unadjusted sales grew 5.4%, according to a National Retail Federation analysis of U.S. Census Bureau data.
Heading into November, shoppers became distracted by the U.S. presidential election, according to market research firm Circana. General merchandise sales fell 9% in the two weeks ended Nov. 9, compared with a year ago, the weakest performance for the category in the past 52 weeks, Circana said. Marshal Cohen, Circana's chief retail industry adviser, said he expects pent-up demand to fuel a postelection rebound in spending.
The National Retail Federation sees sales for the November-December period growing 2.5% to 3.5% compared with the same period a year ago. That range would be the slowest growth since 2018.
Some retailers that had been putting up strong sales gains experienced slower growth in the fall quarter, including TJX, which owns the T.J. Maxx, Marshalls and HomeGoods chains, and Coach parent Tapestry.
TJX Chief Executive Ernie Herrman attributed the slower growth to warm weather and hurricanes that battered parts of the country. He said business has picked up in recent weeks, and the chains are entering the holiday season on stronger footing.
Aside from inflation, retailers face the threat of tariffs from the incoming Trump administration. Donald Trump has proposed a 20% tariff on all imported goods and 60% on imports from China.
Steve Madden is moving production to Cambodia, Vietnam, Mexico and elsewhere to reduce its dependence on China to about a quarter of its business, down from just under half currently. Other brands have already made similar changes. At Gap, Ralph Lauren and Tapestry, China represents 10% or less of global sourcing.
The prospect of tariffs could help boost sales during the holiday season. Craig Johnson, president of consulting firm Customer Growth Partners, expects shoppers to buy big ticket items like television sets and major appliances now, before tariffs go into effect. "Knowing the TV you want may cost more next year will get cautious consumers off the sidelines," he said.
Write to Suzanne Kapner at suzanne.kapner@wsj.com
(END) Dow Jones Newswires
November 24, 2024 05:30 ET (10:30 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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