By Sarah Nassauer, Suzanne Kapner and Natasha Khan
Two different consumers are fueling this year's holiday-shopping season: high-end luxury shoppers and deal-hunters making everyday-spending trade-offs to keep the gifts flowing.
The myriad choices these more cautious shoppers are making help illuminate why spending is up but consumer confidence is dragging in the final stretch of the year. On Black Friday, the year's busiest shopping day, sales rose 4.1% compared with last year, Mastercard data show.
Even with holiday shopping off to a robust start, consumers -- especially those from less-affluent households -- are pulling back on routine purchases as they give priority to gifts and holiday meals. Sales on things that can wait, such as haircuts, pricier razors and fast-casual lunches, are slipping.
Spending on clothing, toys and seasonal items, on the other hand, is strong. And some of the biggest sales increases from last year are in luxury goods like clothing and accessories.
While upper- and middle-income customers continue to spend, those on the lower side "are having to make adjustments," Macy's Chief Executive Tony Spring said in an interview this week. "There is more of a waiting game that occurs for the best value and best promotion."
Nor is it just lower-income shoppers who are making trade-offs. Elisabeth June, a marketing executive in Tampa, Fla., said she and her four older siblings agreed to forgo gifts for each other this year, instead giving priority to the children in the family.
"Even though I don't feel the current strain," the 32-year-old said of gloomier consumer sentiment data and a recent wave of corporate layoffs, "I feel like I'm anticipating or worried about what may potentially happen."
Still, on Black Friday she splurged on items she deemed functional and great temporary deals, including Staub cast-iron cookware and McGee & Co. home decor she has long wanted. "They were on sale, and I knew they probably wouldn't be for forever," June said.
Online spending has been especially strong as holiday shoppers continue their steady, yearslong shift from bricks-and-mortar stores to e-commerce purchases. Online sales between Thanksgiving and this past Monday rose 7.7% compared with last year, according to Adobe Analytics data.
"Holiday shopping is an essential part of the budget," said Matthew Shay, president of the National Retail Federation. It's "an emotional purchase families plan for -- families save for," he said. The NRF estimates overall holiday sales will grow between 3.7% and 4.2% compared with last year. More than half of the 3,000 consumers it surveyed over the Thanksgiving weekend said discounts and promotions drove most of their purchasing decisions.
Retailers say that appealing to shoppers' wish for value, fast shipping, trendy apparel or unique luxury goods have helped them deliver strong sales going into the year-end shopping season. Walmart, Ralph Lauren, Coach parent Tapestry, Gap, American Eagle and Macy's have all found ways to expand sales of late.
Deeper discounts this season have also driven shoppers to purchase higher-ticket items, such as sporting goods, and appliances, according to Adobe's data on e-commerce sales. Black Friday sales of luxury clothing and accessories rose 21% from last year, more than any other category, separate Salesforce data show.
Still, businesses that sell the goods and services that keep regular life humming -- like hair cuts -- are feeling the effects of consumers reining in spending elsewhere.
Chris Larkins, who operates 53 Regis Corp. Salons, including Supercuts, in Western states, said he has noticed clients going longer between haircuts amid nervousness about the economy.
They are saying, "I can do with my hair an inch longer," said Larkins. Meanwhile, the business has attracted new clients who previously spent more at higher-end salons for similar services, he said.
Madison Reed, a company that sells home hair color, as well as salon-coloring services, is seeing more people choose to color their hair at home, a less expensive option, said Amy Errett, the company's founder and chief executive. Meanwhile, sales of its Root Perfection product -- which extends coloring by about three weeks -- have grown by 30% this year. She attributes the trend to customers extending the time between appointments or full-on treatments.
Its membership has grown, in part because people want more affordable hair-coloring options, said Errett. "No matter what happens, she's going to color her hair," Errett said of the typical Madison Reed customer. But "she's looking for more value."
Some companies are starting to feel the effects of those consumer trade-offs. "We have seen some moderation in spending in the low-income cohort," John David Rainey, Walmart's chief financial officer, said recently.
Procter & Gamble, which makes Tide detergent, Bounty paper towels and Crest toothpaste, said this week it was seeing more caution from American consumers.
"I think the context in the U.S. is more volatile, probably the most volatile we've seen in a long time," Andre Schulten, P&G's chief financial officer, said. Across the consumer goods industries, some of P&G's product categories saw a significant drop in sales overall in October, which likely continued in November, he said.
Likewise, Signet Jewelers reported strong quarterly results this week but said it had seen softer foot traffic recently, particularly among its brands with more exposure to lower- and middle- income shoppers such as Zales and Banter by Piercing Pagoda. Among other economic pressures, consumers are also feeling the lingering effects of the government shutdown, Signet Chief Executive J.K. Symancyk told analysts Tuesday.
"Our consumers are dealing with a lot," he said.
Write to Sarah Nassauer at Sarah.Nassauer@wsj.com, Suzanne Kapner at suzanne.kapner@wsj.com and Natasha Khan at natasha.khan@wsj.com
(END) Dow Jones Newswires
December 04, 2025 21:00 ET (02:00 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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