It could be a very festive season for big stores and the wealthy | CNN Business (2024)

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Heading into the all-important holiday shopping season, investors have been nursing a big concern: Will supply chain issues lead to empty shelves, making it impossible for retailers to take advantage of huge demand for toys, appliances and other items as the economy recovers from the pandemic?

The answer appears to be no — at least if you’re a massive company like Walmart (WMT) or Home Depot.

What’s happening: Large retail chains have chartered their own ships to deliver goods from Asia, stocked up on extra merchandise and relied on their deep pockets and broad catalogue of suppliers to ease the bottlenecks.

Adobe Stock Related article Thanksgiving essentials are out of stock

The strategy appears to be working. Walmart just reported that in the three months through October, sales at US stores open for at least a year increased 9.2% over the same period in 2020. The company boosted its full-year sales guidance. Home Depot (HD) said that same-store sales rose more than 6% globally and 5.5% in the United States.

“We took a lot of steps early in the year to try to get ahead of what we thought could be some congestion and some other supply chain pressures,” John Furner, Walmart’s US CEO, told analysts on Tuesday.

Walmart’s inventory levels increased 11.5% last quarter from the year prior as the company stocked up in anticipation of the holiday stretch.

Its shares initially rose on Tuesday but finished down 2.6%. Home Depot’s stock rallied 5.7%.

Step back: The results are a reminder that smaller retailers without the ability to charter vessels or hoard shipping containers could bear the brunt of the shipping crisis that’s developed this year, while bigger firms like Walmart can throw money at the problem.

Soaring inflation, which is increasing at the fastest rate in three decades in the United States and is at a 10-year high in the United Kingdom , is making shoppers uneasy. The consumer sentiment index from the University of Michigan fell to a decade low in early November.

So far, data indicates that shoppers are still hungry to spend as retailers dangle early deals in an attempt to front-load demand. US retail sales rose 1.7% in October compared to the previous month, the biggest gain since March.

Yet once again, not everyone is impacted equally. Holiday spending is expected to average $1,463 per household, up 5% from 2020, according to a survey from Deloitte published last month. But the consulting firm predicts huge discrepancies in spending among income groups.

“There is a tale of two holiday seasons, with higher-income households planning to spend five times that of lower-income households,” Deloitte said. “Indeed, the majority of this season’s gains will be driven by higher-income shoppers who expect to spend 15% more than last year.”

Big picture: Just as big stores are better able to weather higher costs, so too are households with more cash on hand for discretionary purchases. And if inflation keeps climbing, it could worsen that divide.

“While spending remains robust, we believe elevated [consumer price inflation] as well as higher gas prices could limit overall volumes this holiday season as purchasing power decreases,” Bank of America’s analysts said in a recent research note.

The deadline to raise the US debt limit is coming up

The US government is set to run out of money on December 15 if Congress doesn’t take steps to raise the country’s debt limit.

That’s the latest warning from Treasury Secretary Janet Yellen in a letter to House Speaker Nancy Pelosi on Tuesday.

“There are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the US Government beyond this date,” Yellen said.

Remember: The December deadline comes after Congress approved a short-term extension of the nation’s debt limit in October following dire warnings from Yellen about the economic fallout that would ensue if the issue went unaddressed.

But now that President Joe Biden has signed into law a $1.2 trillion bipartisan infrastructure package , attention is shifting back to government finances.

It’s unclear how Democrats will proceed. Republican leaders, including Senate Minority Leader Mitch McConnell, have repeatedly stated they will not help with legislation to raise the debt limit. Democrats have argued the issue is a bipartisan responsibility.

Yellen cautioned that the situation is quickly becoming urgent again.

“To ensure the full faith and credit of the United States, it is critical that Congress raise or suspend the debt limit as soon as possible,” she said.

Investor insight: For all the brinkmanship, Wall Street is expecting Congress will do what’s necessary to avert a US default — a “code red” situation that could result in a recession.

“For investors, the message is the same: Debt ceiling worries will resurface, but we believe Congress will once again avoid walking over the cliff,” BTIG’s Isaac Boltansky said in a recent note to clients.

Wall Street bonuses are set to surge this year

The stock market has been hitting record highs. Unicorn startups are making their public debuts at a record clip. And many big companies are tapping piles of cash for big-ticket acquisitions.

Behind the curtain is Wall Street’s investment bankers, who are expecting big increases in their bonus checks as a result of the action.

Consultancy Johnson Associates is forecasting a surge in bonuses for financial service professionals from a year ago, when many on Wall Street took home slimmer checks as the pandemic weighed on the global economy and dealmaking, my CNN Business colleague Paul R. La Monica reports.

“Virtually all financial services industry segments, including investment banking, asset management and alternative investments are performing at record levels,” Alan Johnson of Johnson Associates said in a report. “This, in turn, will translate into incentive award increases we haven’t seen in the industry since before the Great Recession,” he added.

Investment banking advisers and equity traders are both expected to see 20% to 25% jumps in their bonuses compared to 2020, while those underwriting stock issuance could get bonus increases of 30% to 35%.

Remember: Wall Street is raking in huge sums of money as companies try to take advantage of the market boom. Last quarter, Goldman Sachs brought in $3.7 billion in investment banking fees, the second-highest haul on record. During the same period, Citi logged its best quarter for mergers and acquisitions in a decade.

As profits leap, workers across the pay spectrum are demanding more. At Goldman, total compensation, which includes salary and bonuses, came to an average of more than $336,000 per employee during the first nine months of the year.

Up next

Baidu (BIDU), Lowe’s (LOW), Target (TGT) and TJX (TJX) report results before US markets open. Bath & Body Works, Cisco (CSCO), Nvidia (NVDA) and Victoria’s Secret follow after the close.

Also today:

  • US housing starts and building permits for October arrive at 8:30 a.m. ET.
  • The latest data on US crude oil inventories follows at 10:30 a.m. ET.

Coming tomorrow: Earnings from Alibaba (BABA), JD.com (JD), Macy’s (M) and Kohl’s (KSS).

It could be a very festive season for big stores and the wealthy | CNN Business (2024)

FAQs

How did retailers do this Christmas season? ›

Still, spending in categories like electronics and jewelry declined this season. And the rate of growth in spending has moderated from the last couple of years. In 2022, retail sales during the holiday season increased 5.4 percent, according to the National Retail Federation.

Is Black Friday good for the economy? ›

Higher spending on Black Friday can lead to higher demand for goods and services, which can push up prices and inflation. Conversely, lower spending on Black Friday can lead to lower demand for goods and services, which can pull down prices and inflation.

How much holiday shopping is done online? ›

According to results from a recent survey of consumers' holiday shopping plans, nearly one out of every 10 shoppers (9%) plan to do all of their winter shopping online. Another 31% say they will do most of it online and the rest in brick-and-mortar stores, while 37% intend to split it 50-50.

What is the biggest cause of loss to retailers? ›

Shoplifting: the leading cause of retail shrinkage

This rate can be calculated using the following formula: (total cost of losses / sales turnover achieved) x 100.

How does Christmas shopping affect the economy? ›

Due to increased demand and footfall, employment is provided for many individuals during Christmas, often at a higher pay rate. These are often jobs in retail, logistics and hospitality, and many people rely on this for their yearly income.

How do retailers prepare for the holiday season? ›

Gather plenty of inventory

Be sure that before the holiday season, you must already stockpile adequate inventory to satisfy the enormous demand of shoppers. If you really wanted to make people spend more money on the products that you sell, you should have ample stock as much as possible.

Why do stores start Christmas early? ›

Economic motivation. The phenomenon is associated with a desire of merchants to take advantage of particularly heavy Christmas-related shopping well before Black Friday in the United States and before Remembrance Day in Canada.

Why is it called Black Friday? ›

A more accurate explanation of the term dates back to the early 1960s, when police officers in Philadelphia began using the phrase “Black Friday” to describe the chaos that resulted when large numbers of suburban tourists came into the city to begin their holiday shopping and, in some years, attend Saturday's annual ...

Do stores make more money on Black Friday? ›

Even so, Black Friday remains one of the biggest shopping days of the year, as consumers brave crowds and long lines to take advantage of deals — which can lead to considerable profits for businesses. The most successful stores have established strategies for marketing deep discounts to consumers.

Is Black Friday really cheaper? ›

Depending on what you're shopping for, Black Friday can be the cheapest time to buy. But not every deal that shows up during November is a good deal. And this sales season will most benefit the smart shoppers who plan in advance. For the unwary, it can be easy to make bad buys.

Is shopping cheaper after Christmas? ›

Are Sales After Christmas Worth It? Waiting to buy certain items until after Christmas can save you a substantial amount of money. The best strategy is to plan ahead and have a list of items you wish to buy at discounted prices.

What is the largest shopping holiday? ›

U.S. sales days when most people do their holiday shopping 2020-2022. Black Friday led the way for most popular sales days in 2022, with over half of American shoppers intending to purchase a present on this day.

What is the prediction for holiday shopping? ›

We forecast that total retail sales for the 2024 holiday season will reach $1.372 trillion, growing 4.8% YoY. Ecommerce sales will grow 9.5% to reach $271.58 billion, per our forecast, as consumers go online for quick, easy purchases and easy price comparisons. Non-ecommerce sales will grow 3.7% to reach $1.1 trillion.

What factors influence shopping? ›

The main factors include psychological, social, cultural, personal, and economic influences that affect consumers' purchase decisions and behaviors.

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