Will it be a dud for retailers and investors?

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Monday, November 21, 2022

Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with Yahoo Finance App.

There’s optimism in the air, based on some early Black Friday projections.

Mastercard SpendingPulse sees Black Friday sales rising a hearty 15% year over year, and Walmart sees its U.S. division posting a 3% same-store sales increase in the fourth quarter.

But the former retail analyst in me thinks companies and investors will have a relatively subdued holiday shopping season for one big reason: Inflation remains omnipresent on the minds of consumers.

Consequently, 15% Black Friday sales growth is a huge call inside of a barely growing economy, and Walmart’s outlook is quite aggressive given that Thanksgiving dinner will cost 20% more this year.

Other data corroborates this view: In a new Goldman Sachs survey, roughly 55% of respondents said they plan to buy fewer items this year as a result of the challenging macroeconomic backdrop. Some consumers plan on not only buying less, but also trading down to cheaper price points and quality levels.

Another survey out of Citi found that all income brackets indicated they planned to spend less, with the greatest percent of respondents indicating the decision was due to having less money to spend and because of high fuel and food prices.

Makes sense based on what retail execs are telling me.

“I think we’re going to be operating in a very uncertain environment,” Target Chairman and CEO Brian Cornell told me. “A consumer that’s clearly facing the challenges of managing a budget, and they’re going to be looking for promotions. So we’ll be preparing for that.”

Walmart’s CFO John David Rainey told me consumers are “looking for value,” as if to hint the shopper will leave an item on the shelf if the value equation isn’t right.

A Santa Claus statue is seen near a sale sign during Black Friday sales at the Eagle Rock Plaza in the Eagle Rock area of Los Angeles November 26, 2010. REUTERS/Phil McCarten (UNITED STATES – Tags: BUSINESS)

I think you will hear equally dour vibes from Best Buy’s earnings later this week.

All of this will be on the table for discussion at my “Rockin’ Retail Special” that will air live today on Yahoo Finance at 2PM ET. I will be stationed at the Oculus in NYC with an all-star mix of retail experts, including former CEO of Gap and J Crew Mickey Drexler.

So tune in on finance.yahoo.com, on our YouTube channel, or on the Yahoo Finance app for Apple or Android — in any case, be sure to pick your retail stocks with extra care this season.

In the meantime, Happy Trading!

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