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Shoppers converge in a Target store ahead of the Thanksgiving holiday and traditional Black Friday sales in Chicago, Illinois, U.S. November 21, 2023. REUTERS/Vincent Alban/File Photo

MONEY & BUSINESS: Uncertainty clouds holiday shopping season after mixed forecasts from Walmart, Target – One America News Network

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November 20, 2024 – 6:32 AM PST

Shoppers converge in a Target store ahead of the Thanksgiving holiday and traditional Black Friday sales in Chicago, Illinois, U.S. November 21, 2023. REUTERS/Vincent Alban/File Photo

(Reuters) – Retailers are in for a mixed holiday season this year ahead of Black Friday and Christmas, marked by watchful consumers keeping big spending on a tight leash and vigilantly comparing prices on their mobile phones to look for the best deals on apparel, electronics and toys.

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Against this backdrop, bellwether Walmart (WMT.N) lifted annual sales and profit targets this week, and said a majority of its customers were maintaining holiday plans year over year in the midst of an election year.

Walmart has managed to gain marketshare as its ultra-low prices on groceries and a wide range of discretionary goods attract upper-income households to its superstores.

On the other hand, rival Target’s forecasts for the holiday quarter were significantly subdued, with executives saying demand remains weak for higher-margin items such as home goods and electronics.

Despite a rate cut from the U.S. Federal Reserve, the first in four years, consumer spending on non-essential items has remained uninspiring, and industry analysts expect a deal-heavy holiday shopping season yet again.

Overall holiday shopping is expected to grow at its slowest pace in six years, according to separate reports from the National Retail Federation and Deloitte.

This year, there are just 26 days between Black Friday — which has traditionally marked the beginning of the holiday shopping period, and Christmas, compared with 31 days last year.

Despite fewer days to shop, a record 183.4 million people are planning to shop in-store and online from Thanksgiving Day through Cyber Monday this year, up from 182 million shoppers last year, according to the NRF.

“The fourth quarter will be fun to watch. And the calendar is not our favorite with fewer days between Thanksgiving and Christmas. And I suspect when all that’s said and done, it will be similar to the kind of momentum that we’ve seen in the first three quarters,” said Walmart CEO Doug McMillon on a post-earnings call on Tuesday.

The shorter calendar prompted retailers to try and pull forward some demand earlier in the year, offering heavier discounts as early as July, around the back-to-school shopping season.

Gen-Z consumers, more comfortable shopping on phones, are driving a shift towards mobile spending, and are likely to influence families to do the same over the holidays, said Minkyung Kim, Assistant Professor of Marketing at Carnegie Mellon University’s Tepper School of Business.

MOBILE PHONES, LOYALTY PROGRAMS ARE KEY

Mobile phones are expected to account for 53% of online spending from November through December, reaching a total of about $128.1 billion, according to a forecast from Adobe Analytics which measures online consumer transactions from 5,000 shoppers.

Online spending growth is expected to jump to 8.4% from 4.9% last year, according to Adobe’s forecast, with mobile spending growth expected to jump a “staggering” 12%.

Influencers promoting brands on social media have played a critical role in shaping consumer sentiment and shopping patterns. “I expect that trend to continue, particularly with the advancement of artificial intelligence,” Kim added.

“These younger consumers are growing in their spending power and they’re early in their career development, so to get them as loyalty members and familiar and comfortable regularly shopping with your brand is very important to growing revenue over time,” said Wedbush analyst Seth Basham.

In fact, spruced-up loyalty programs with perks such as same-day or free delivery, personalized marketing and quicker check-outs at stores allowed Target and Walmart to induce an early splurge during back-to-school shopping, and the retailers plan to continue to make these programs more appealing as holidays approach.

Target’s 20% growth in same-day delivery, driven by its refurbished rewards program, contributed to double-digit growth in digital comparable third-quarter sales — one of the only bright spots for Target this year.

Walmart also began offering its $98 Walmart Plus membership at about half price from Oct 28 through Dec 2, and reported a fourth straight quarter of double-digit growth in global membership income.

“The big change that we’ll concentrate on this holiday is how much fight there will be for that new incremental customer. I think because of that you’ll see increased targeted promotions just try to get new customers at an accelerated rate,” said M Science analyst John Tomlinson.

Target said on Wednesday that in addition to hosting early Black Friday sales, it is having exclusive deals on pop star Taylor Swift merchandise.

Budget-conscious shoppers are flocking to discount retailers like TJX Cos (TJX.N), which on Wednesday said that a broader range of customers are looking for deals on its third-quarter earnings call. It raised its annual profit forecast on Wednesday.

Reporting by Juveria Tabassum in Bangalore and Arriana McLymore in New York Editing by Nick Zieminski

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