Holiday Sales Growth Expected to Normalize to Prepandemic Levels

Despite shoppers’ election-year concerns and worries about the economy, retail executives predict sales to increase as much as 3.5 percent over last year’s holiday season.

The holiday shopping season this year is marked by abnormalities: a contentious presidential election, uncertainty about the direction of the economy and stubborn inflation. But despite those obstacles, retail sales are expected to be … normal.

The National Retail Federation said on Tuesday that it expected holiday sales to increase 2.5 to 3.5 percent from last year, to as much as $989 billion. That’s slightly slower growth than the year before, when holiday sales in 2023 rose 3.8 percent, but in line with the 3.6 percent annual increases that marked the season before the Covid pandemic sent shopping into overdrive.

The economy “looks much more like a prepandemic economy in terms of the spending patterns and the growth,” said Matthew Shay, chief executive of the National Retail Federation, on a call with reporters.

The group defines the holiday season as sales from Nov. 1 to Dec. 31, and does not include purchases from auto dealers, gasoline stations and restaurants. Once again, the growth of e-commerce sales is expected to outpace total retail sales, with the trade group estimating that they will rise 8 to 9 percent, between about $295 billion and $298 billion.

Although higher prices continue to cause sticker shock at the store, the labor market has stayed surprisingly strong. Wage growth has outpaced inflation, allowing people to continue to spend even as they shift priorities from discretionary items and dining out to essential things like groceries.

Mr. Shay said he expected consumers to be price-conscious and pragmatic during the holiday shopping season, which can be a make-or-break period for retailers. “Many consumers do have those interest rates and the lingering inflation of some categories on their mind,” he said. “So we expect there will be a promotional environment.”

This year, retailers are again trying to highlight the “value” of their merchandise. Target and Walgreens announced price cuts this year on a wide assortment of items. Walmart says it is offering 7,200 more price rollbacks than the prior year. But to head off the feelings of unease as Election Day nears, retailers are also positioning themselves as counterprogramming to the bad vibes that voters — whom they call their customers — may be feeling.

Macy’s chief executive said in an interview in August that he hoped shopping at his department-store chain would be a form of an “escape from the noise and divisiveness and discomfort that the consumer has from the polarization of the country.” This fall, Kohl’s rolled out a new marketing campaign: “When Life Gets Real, Start Here.”

Continuing a trend that started during the pandemic, retailers are stretching out the holiday shopping season, placing Christmas merchandise like Santas, frosted trees and inflatable Rudolphs within their stores weeks before Halloween. While customers have pulled back on discretionary spending, stores have noted that many are willing to spend around seasonal events, making it even more pressing to win their business during this time of year.

“Customers can see that we’re ready and we’re here for them right from the outset,” Nick Jones, the chief merchandising officer at Kohl’s, said last week while pointing out the holiday merchandise at the front of one of the retailer’s stores in Ramsey, N.J. “They know as soon as they walk in, even if their mind isn’t on holiday quite at this moment, that Kohl’s is going to be a great destination.”

Retail executives are hoping that customers start spending earlier. On the call, Mr. Shay noted the shorter time period between Thanksgiving and Christmas this year. That, compounded with continued growth in online shopping, will put supply chains and logistics to the test.