Analysts are expecting that the upcoming festive season is set to grow at a more modest pace, with the National Retail (NYSE:NNN) Federation (NRF) forecasting holiday spending to grow between 2.5% and 3.5% over 2023. Total (EPA:TTEF) holiday spending for the same period last year grew 3.9%.
Estimates put total holiday spending to reach between $979.5 billion and $989 billion over the festive period, which runs between November 1 and December 31. This year consumers will be taking a more conscious approach to their holiday shopping, as inflation and higher prices continue to rattle many household's budgets.
Despite higher prices, and the majority of consumers - 59 percent - saying that inflation is one of the main contributors to their decision to spend more conservatively this year, new data collected by multinational consulting firm Deloitte shows that some consumers are set to increase their holiday budgets.
Most American consumers are planning to hike up their spending this year. On average, spending per shopper will come up to $1,778, an increase of 8% year over year this holiday season, according to the 2024 Deloitte Holiday Retail Survey. Many have perceived that higher prices and better economic conditions have contributed to their decision to up their purchases this year.
Inflation has remained on the cooler side this year and continues to move towards the U.S. Federal Reserve's target rate of 2%. In September, reported inflation stood at 2.4% down from 2.5% in August. Inflation has fallen to its lowest level since February 2021 and is down 1.3% compared to September 2023.
This year, retailers are looking to bring customers back, and though many expect this festive holiday season to see softer retailer spending, investors are optimistic that the American economy has remained resilient despite the wider setbacks of the last couple of years.
Costco (NASDAQ:COST)
The big-box wholesaler Costco (COST), which gets a thumbs up from guru Warren Buffett, last year closed out 2023 on a high note, with total sales across the company up 9.9% over the five-week festive period, ending December 31, 2023.This year, holiday shopping trends could bring a similar outcome as more consumers are looking to get more for their money. In December last year, U.S. store sales rose 7.7%, in Canada 12.8% and e-commerce sales soared by 17.7%.
The wholesaler has been a holiday favorite for consumers and investors alike. For consumers, it's the fact that Costco offers them value for money, for investors, there's an upside in COST over the festive period.
Bigger spending budgets will help play in Costco's favor this year. Not only this, but a solid online presence and growing e-commerce fulfillment are helping the company remain a strong competitor among other big-box chain retailers, including Walmart (NYSE:WMT), Target (NYSE:TGT), and The Kroger (NYSE:KR), among others.
Fourth-quarter net sales held strong despite experiencing a slight pull-back near the middle of September due to port strikes and the overactive hurricane season in October. Total quarterly net sales of $78.2 billion was an increase of 1.% compared to the same period last year.
Fiscal full-year sales remained in line with expectations, with Costco reporting total net sales of $249.6 billion for the 52-week period, an increase of 5.0% from $237.7 billion reported in the 53-week period of 2023.
Despite the mixed fourth quarter, and having to navigate several obstacles, Costco's October net sales of $20.03 billion came in at 7.2% higher compared to the $18.68 billion reported for the same period last year.
October's sales, along with September's 9% increase over August show continued demand and a strong consistency across the company's business and operating model. Despite the membership-only retailer having increased membership fees for U.S. and Canadian customers, the company ended the fourth quarter with 76.2 million paid household members, which was an increase of 7.3% compared to the prior year.
COST shares have jumped 38% year-to-date and are up by more than 57% over the past year, through to November 7, 2024. Shares rose over 17% in the festive shopping period of last year, which shows that there is plenty of reason for the company to experience another strong and busy holiday season.
TJX Companies (NYSE:TJX)
Consumers shopping on tighter budgets this year could be turning to one of TJX Companies (TJX) countless stores for their holiday gifting needs. The off-price clothing, fashion, and home retailer operates several brands under its portfolio, including TJ Maxx, Marshalls, HomeGoods, HomeSense, Sierra, and Winners in Canada.The company typically benefits from periods of cyclical sales, including holiday retail spending, Black Friday deals, and Back-to-School savings promotions. As more consumers across most income levels begin to feel the reality of inflation and higher prices eat into their disposable income, TJX is positioned to likely scoop up those shoppers looking for more affordable alternatives.
Second-quarter results showed that the changing consumer behavior has bolstered bottom-line performance. TJX reported $13.5 billion in net sales for Q2 2024, an increase of 6% compared to the same period last year.
Overall, the company has seen strong growth in in-store sales, despite having an e-commerce platform. Comparable store sales grew 4% in Q2, while the first half of fiscal 2025 net sales of $25.9 billion increased 6% compared to 2024.
More than this, second-quarter results showed that the company is ahead of its planned pre-tax profit margin increase. In Q2, TJX reported a 10.9% profit margin, which was an increase of the planned 0.5%.
These developments have helped investor sentiment, as the company has already started increasing its full-year 2025 pre-tax profit margin and earnings per share.
TJX Companies looks to benefit from its favorable pricing model that allows them to sell off-price apparel and home fashions at a lower margin compared to other Mainstreet retailers in the same category.
Not only this, but a large footprint across the U.S., Canada, and internationally is also helping them win over budget-stressed shoppers this year. The company opened its 5,000th store during Q2.
Share performance has held strong, despite wider supply chain challenges. TJX shares are up 23% year to date, but remain 3.82% below its peak in September. Shares are up over 27% compared to the start of the holiday season last year between November 3, 2023, through November 7, 2024.
Amazon (NASDAQ:AMZN)
Shoppers looking for the best prices and promotions will be turning to Amazon (AMZN) this year, as the e-commerce retailer has become the platform of choice for many consumers who are after the best possible deal they can find online.Outside of Black Friday, Amazon typically touts shoppers with several other key sales days throughout the festive period, the latter being Cyber Monday and Prime Day events. One survey of 800 shoppers found that 48% of consumers said that attractive pricing and massive sales deals on Prime Big Deal Day were their primary reason for shopping.
Price-conscious consumers will be using Amazon as a benchmark to hunt for the best possible price. However, attractive membership benefits such as same-day delivery and additional Prime Day discounts for paid members will help bolster their holiday sales.
Amazon's global footprint will give the company a stronger upside compared to other retailers. In Q3, the company reported net sales of $158.9 billion, an increase of 11% compared with $143.1 billion in Q3 2023.
Despite the unfavorable conditions in year-over-year changes in foreign exchange rates, total quarterly sales remained at a double-digit improvement of 11%. North American sales were up 9% compared to Q2 2023, while international sales grew 12% year over year to $35.9 billion.
And while the company has become more of a tech company in recent years, with Amazon Web Services (AWS) sales increasing 19% year over year to $27.5 billion, the company saved Prime Members more than $1 billion in deals across its online offerings during its annual Prime Big Deal shopping event.
Despite the rosy performance of the last few holiday seasons, there remains a growing issue that could hamper Amazon's upcoming seasonal success. Industry insights reveal that coupon-related fraud and fake promotional sales are leaving vulnerable shoppers susceptible to the risks of online crime.
Typically, online-related crimes, such as coupon fraud, scams, and fake sales spike during important holidays, including the festive season and over the summer holidays. This comes at a time when many consumers have become desperate to cut back on spending amid elevated prices, with many seemingly desperate to try any alternatives to lower their holiday spending.
According to a lawsuit filed in 2023, Amazon claimed to have incurred more than $700,000 in losses at the alleged hands of an organized retail crime ring involving ten fraudsters. Amazon is the second-most frequently impersonated company, with more than 44,000 reports of scammers using Amazon's name, amounting to more than $19 million in reported losses, according to a report by the Federal Trade Commission (FTC).
The company, along with other major retailers, has been going up against more sophisticated fraudsters in recent years. Last year, over 34 million American consumers were victims of fake scams and fraudulent activities during peak holiday sales events such as Black Friday and Cyber Monday, according to the research.
While investors might not be too concerned about the rise in cybercrime or online scams directly targeted at Amazon customers, AMZN shares have seen robust delivery in the last several months, having improved 11.35% in the last 6 month period, and are up an impressive 40% since the turn of the year.
Festive Cheer For Your Portfolio
As retailers brace for what could be a slower-than-usual festive period, as holiday spending is expected to come in more modestly, perhaps investors could find some luck with a handful of consumer retail stocks that will bring festive cheer to their portfolios and help them end the year off on a high note.Disclosure: No positions in any stocks mentioned. I am long Berkshire Hathaway (NYSE:BRKa)