As Black Friday approaches, our US Thematic and Equity Strategist
Michelle Weaver explains why some US consumers will increase
their spending and which industries could benefit.
----- Transcript -----
Michelle Weaver: Welcome to Thoughts on the
Market. I'm Michelle Weaver, US Thematic and Equity Strategist.
The holiday season is just around the corner, and today I'll be
discussing what US consumers are planning for this year's holiday
shopping.
It's Monday, November 25th at 10am in New York.
It's that time of year when New York City goes from skyscrapers
to sky high trees. So, cue the holiday music, holiday shopping
season is here. My colleagues Jim Egan, Arunima Sinha, and
Heather Berger recently came on this show to discuss the current
state of the US Consumer. Today, I want to expand a little bit on
their analysis by looking specifically at how holiday shopping
could fare this year.
Overall, consumer spending trends have been robust year to date,
which does bode well for holiday spending. We recently ran a
proprietary survey of around 2000 US Consumers that showed a more
positive outlook for holiday shopping this year versus in 2023
and 2022. Not surprisingly, though, higher income households –
who've really been the key drivers of aggregate consumer spending
– are likely to drive the spending this holiday season as well.
Overall, we expect to see increased holiday budgets this year.
Our survey found that 37 percent of US consumers are planning to
keep their holiday budgets roughly the same as last year. Around
35 percent are expecting to spend more and 22 percent are
expecting to spend less. So, this yields a net gain of around +13
percent. It's not off to the races, though, and consumers will
continue to be selective on where they're planning to allocate
their dollars.
Discounts and promotions are going to have an impact on shoppers.
And in fact, if retailers don't offer discounts, 44 percent of
shoppers say they may pull back or trade down somewhat, and
another quarter of purchasers say they'll scale back
substantially. Only about a quarter of people would go ahead with
all the planned purchases if there were no discounts or
promotions.
We also asked questions in our survey looking at the categories
shoppers are planning to make purchases in. We looked at the net
difference between the percent of consumers expecting to spend
more and the percent expecting to spend less. And the lowest net
spending intentions are reported for big ticket categories like
sports equipment, home and kitchen, and electronics. And then the
results were more positive for apparel and toys, which are
cheaper items.
Let's dive in now to some of the specifics around consumer facing
industries. Within airlines, we're expecting a strong holiday
season for air travel based on encouraging TSA data. This lines
up with continued strong demand for travel and live experiences.
Within durable goods, which are the kind of things you might find
at a big box store or a furniture store, spending has slowed this
year, but the backdrop is normalizing, which could create a more
favorable setup this holiday season. E-commerce, though, on the
other hand, has been pressured recently, and the weakness has
impacted discretionary goods, while outsized growth has come from
non-discretionary categories like groceries and everyday
essentials.
The shorter holiday shopping season may also have an impact on
e-commerce. This year, there are only 27 days between Black
Friday and Christmas, which is the shortest that range could
possibly be. So, this could affect e-commerce players with longer
average delivery times. We're cautious on consumer electronic
sales this holiday season. Consumer hardware spending intentions
remain negative as we near the holiday season. And then finally
for toys, leisure products, and services, we're cautiously
optimistic that the holiday season could prove better than
feared.
So, all in all, the holidays are looking reasonably bright for
many businesses, especially those with more exposure to the
high-end consumer; but like consumers, we think that the results
will vary by industry and by company.
Thank you for listening. If you enjoy the show, please leave us a
review wherever you listen and Share Thoughts on the Market with
a friend or colleague today.
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