Gerald Storch, Target's former vice chairman, said Thursday that holiday spending will be disappointing this year as inflation-hit consumers run out of savings and cut spending due to geopolitical uncertainty. He warned that there was a high possibility.
“It's clear that consumers are running out of money,” said Storch, who was also the former CEO of Toys R Us in the 2000s and early 2010s. told FOX Business. “They are increasingly stressed by inflation and the depletion of pandemic-era savings.”
When asked about his expectations for this year's holiday shopping season, Storch was candid.[I don’t expect] Frankly, there are too many. ”
Mr. Storch pointed to persistent inflation that has kept prices high and put a strain on consumers' wallets, as well as the continued close race between former President Donald Trump and Vice President Kamala Harris ahead of the election, and concerns over the Gaza Strip and the Gaza Strip. He cited the tense geopolitical atmosphere as war rages in the region. In Ukraine.
The longtime retail executive's stark warning comes on the heels of positive economic data.
Retail sales rose 0.4% in September, beating expectations and showing consumer resilience, according to a report released Thursday by the Commerce Department.
Unemployment claims rose in the aftermath of Hurricane Helen, which devastated states in the Southeast, but the number of Americans applying for unemployment benefits unexpectedly fell last week, providing another positive sign for the economy. .
But Storch said these numbers, when put into context, are not all that reassuring.
“If you look at the past few years, what everyone is talking about every month is that consumers are still spending,” he said. “That may be true, but their spending is growing less than inflation.”
For example, retail sales rose 1.7% over the past year, while inflation was 2.4% over the same period, Storch said.
As a result, consumers are “spending more and earning less” as prices rise faster than sales, he said.
The US year-end sales season is expected to be as follows: will grow by 3.5% The National Retail Federation released its forecast for this year on Tuesday.
Although the forecast shows sales growth, it predicts the growth rate will be the slowest in six years.
NRF CEO Matthew Shea said he expects consumers to be price-oriented, realistic and prioritize discounts and sales when looking for holiday gifts.
“I would think so. [if] we can get growth [the] “If it's in the 2.5% range, we're probably doing pretty well, but it's not very good,” Storch told FOX Business. “In our heyday, we really wanted to grow around 4%.”
If the decline in consumer spending isn't enough of a challenge for retailers, they also face a particularly tough holiday season.
“By the way, the holiday season is the shortest imaginable, so this is a disadvantage for retailers,” Storch said. “This is going to be bad because the window between Thanksgiving and Christmas is so short right now.”
As geopolitical tensions increase in the United States and around the world, consumers are likely to become more cost-conscious.
“The election will also affect things and the geopolitical situation, so Christmas will be quite weak,” Storch said.
Meanwhile, retailers are already in a vulnerable position as they prepare for a tough holiday season.
Pharmacy chains like Rite Aid and CVS are closing stores. Just this week, Walgreens announced it would close 1,200 stores over the next three years.
Home furnishings chains like Big Lots and LL Flooring have filed for bankruptcy and shared plans to close stores.
And Dollar Tree plans to close about 1,000 of its discount stores.
“Many of these retailers have expanded very quickly. Walgreens has about 4,000 stores, which is incredible. Same thing with Family Dollar,” Storch said. “Big bet on physical location [came] Just when the consumer was slowing down and of course the internet was growing. ”
