Snair remarked as she filled out appointment forms, “It seems more likely that individuals will receive homemade gifts this year.
She vowed to reduce her present expenditures by more than half and stay away from Amazon.com, which was her primary shopping site the previous year. Do I even have the spare cash to buy gifts for others?
Her concern is understandable, given that costs are rising for all essentials and indulgences due to the biggest inflation rate in forty years, harming consumers.
The home market is suffering from rising interest rates, and the economy is suffering from war, harsh weather, and extreme politics—none of which are exactly conducive to the holiday spirit.
For the companies that provide services to these wary customers, this means preparing for a downturn in the next year that is already endangering Wall Street employment and prompting cautionary remarks on conference calls.
Retailers with the most severe financial problems are particularly at risk from the consumer retreat. More than $21 billion in bonds and loans related to the sector, including debt for big-box retailers like Bed Bath & Beyond Inc. and Party City Holdco, trade at distressed prices.
Although lower-income shoppers have shrunk back, the National Retail Federation had anticipated a 6% to 8% boost in sales this holiday season. There are some recent earnings reports from even some of the more resilient retailers, like Target Corp.
The reports show that consumers are cutting back on their spending. Target said last month that third-quarter sales of discretionary goods like toys lagged and expected a decline in fourth-quarter comparable-store sales.
Inventory issues are exacerbating the stress. After the pandemic delayed deliveries, retailers are still trying to get rid of mountains of unsold items, but with little success. Even retailers have requested that suppliers cease supplying goods due to the accumulation.
Even so, the stocking issues appear to be getting better. Nike Inc., for instance, reported that although its inventory increased by 43% from a year earlier in the quarter that ended on November 30, it was a slight improvement over the 44% growth from the prior quarter.
According to company officials, the number is exaggerated by deficient levels experienced during pandemic disruptions a year ago.
According to Mike Campellone, retailers will continue to be baffled by more items. “Excess inventory will continue to be a concern to sales and profitability as the financial health of the US consumer deteriorate, and customers become more price sensitive,” he warned.
The effects of a slowdown will be more noticeable in some consumer categories. Apparel, especially casual clothing, is among the nice-to-have but not necessary categories of products that are particularly heavily affected, according to Campellone.
Even less careful shoppers will be less likely to spend money on those things today because their sales during the pandemic lockdowns skyrocketed.
The JCPenney employee, Snair, promises to adopt a new practice next year and will ask herself: “Do I genuinely need it tomorrow? Do I need it or not? And what alternatives may I use in their place?