Amid continuing consumer caution, U.S. holiday retail sales in November and December are predicted to rise 4% year-over-year (YoY), falling shy of the 10-year average boost of 5.2%, according to an annual forecast from Bain & Company.
That growth rate would generate some $975 billion in sales, although the final count could be higher if the numbers are boosted by positive factors like rising wages, stock market strength, and potential interest rate cuts, the report said.
But retailers could face an uphill climb, since Bain’s “Consumer Health Index” shows that U.S. households across income groups reported a worsening fiscal outlook in August. In fact, financial strain is evident, Bain found. Severe credit delinquencies (90 or more days overdue) have risen about 3% YoY, reaching their highest level since 2011, particularly among borrowers under age 30. Savings rates remain low, and labor force participation fell 0.4 percentage points in August compared with a year earlier, marking the fourth consecutive monthly decline and reversing the upward trend seen since the pandemic.
In this climate, consumers expect to do more in-store shopping when compared to last year, according to Bain’s survey of U.S. consumers.
The report estimates that in-store sales will grow 2.75% (YoY), contributing 2% of overall growth, with the strongest gains in clothing and accessories, general merchandise (excluding department stores), and health and personal care, which are poised to grow 5% or more. In contrast, sales experienced by other sectors such as electronics and appliances, building and garden, and furniture stores are expected to decline, Bain found.
However, growth from nonstore sales, which includes e-commerce and mail orders, have slowed to 7% — a decrease from 9-10% growth seen by nonstores during the same period in the last two years. Still, nonstore sales are still expected to account for half (50%) of all sales growth overall, the report concludes.
“This holiday season will be a mixed one for U.S. retailers,” Aaron Cheris, partner in Bain’s Retail practice, said in a release. “Consumers are cautious and facing financial pressure, but they are also feeling the lift from higher wages and a strong stock market. Leading retailers will strike the right balance — leaning into value, creating warm human experiences while implementing new technologies, and capitalizing on big events like Black Friday to capture share from competitors.”
