Holiday Sales to See Slowed Growth, Says NRF

Plus, how inflation and winter weather could impact holiday spending.

Lenore Fedow lenore.fedow@nationaljeweler.com

The National Retail Federation is forecasting holiday retail sales will grow between 6 and 8 percent year-over-year to between $942.6 billion and $960.4 billion.

Washington—Retailers can expect a merry holiday season this year, but sales won’t reach the highs of last year.

The National Retail Federation released its annual holiday sales forecast Thursday and is expecting retail sales to grow between 6 to 8 percent year-over-year to between $942.6 billion and $960.4 billion.

Last year, holiday retail sales were up nearly 14 percent year-over-year to a record-breaking $889.3 billion.

Over the past 10 years, holiday retail sales have averaged an increase of 5 percent, said the NRF, with the pandemic spending of recent years accounting for “considerable” gains.

Here are five key takeaways from the NRF’s holiday forecast.

Inflation remains a top concern for holiday shoppers.

The Federal Reserve is continuing its fight against inflation, raising interest rates six times this year, but rising prices are still weighing on consumers.

NRF CEO Matthew Shay described consumer behavior as more thoughtful and cautious during a forecast call Thursday.

“We know that lower- and middle-income consumers are feeling the most pressure when it comes to inflation,” said Shay, noting more of their income is going to housing, rent, energy, and food costs, leaving less for gifts and other holiday expenses.

These households are expected to rely more on their savings and credit to purchase holiday gifts.

In contrast, higher income households are expected to spend significantly more on average on holiday gifts, seasonal items, and other retail categories.

NRF Chief Economist Jack Kleinhenz said, “Consumers are worried about inflation. It’s on the top of their minds.”

A recent KPMG holiday survey came to the same conclusion, finding that inflation topped the list of shopper concerns, with 85 percent of those surveyed saying they were at least somewhat concerned about inflation.

“But they still have the ability to spend,” Kleinhenz added, noting consumers are supported by job growth, rising wages, and the ability to tap into savings.

Early shopping is here to stay.

The NRF defines the holiday season as Nov. 1 through Dec. 31, but the holiday season has been extending into fall for the last decade, it noted.

The early shopping trend is due in part to concerns about inflation and product availability, said Kleinhenz.

In response to inflation, 46 percent of holiday shoppers said they would be browsing or buying before November, as per the NRF’s annual survey conducted by Prosper Insights & Analytics.

“Retailers are responding to that demand, as we saw several major scheduled buying events in October,” said Kleinhenz. “While this may result in some sales being pulled forward, we expect to see continued deals and promotions throughout the remaining months.”

Consumers plan to spend $832.84 on average on gifts and holiday items, such as decorations and food, which is in line with the average for the last 10 years.

The labor market will be an ongoing challenge for retailers.

NRF expects retailers will hire between 450,000 and 600,000 seasonal workers this year, down from 669,800 seasonal hires last year.

Notably, the method used to calculate holiday retail employment in 2020 was changed to accommodate the significant impact of COVID-19 on overall industry employment, the NRF said. In 2021, it returned to a traditional employment buildup method.

Some seasonal hires may have been counted in October, said the NRF, as retailers look to bolster their teams before the holiday season.

Retailers looking to hire will have to compete, as always, with other industries, to find the best talent.

“It’s been a tight job market. We still have 800,000 job openings in retail as of the end of September,” said Kleinhenz. “It will be an ongoing challenge.”

Shay described the labor market as “a real conundrum for employers,” but noted it’s also a partial explanation for why consumers have continued to spend.

“[The labor market] is one of the reasons consumers have behaved in such a resilient way, because wages are increasing and there’s pressure on the market and that keeps people spending.”

Shay noted some retailers in need of employees have gotten creative, highlighting UPS’ plan to hire more than 100,000 seasonal workers. The company retains, on average, more than one-third as permanent employees.