In the face of economic worries, retailers are scaling back their growth expectations for the coming year. John Mercer, head of global research at Coresight, noted that companies prefer a cautious approach amidst the unpredictable landscape created by factors like tariffs. This retreat is palpable as consumer sentiment surveys indicate Americans are more anxious about their financial situations than before, showing a decline over two consecutive months in early 2025.
Recent economic indicators point to a slowdown in hiring, manufacturing, and home purchases, heightening fears of an economic downturn. Consumers, after years of resilience, now seem unable to maintain strong spending levels, according to Brandon Svec from CoStar Group. This trend poses significant challenges for retailers selling discretionary items, as they struggle to motivate frugal consumers who have been conditioned by discounts and deals.
Several major U.S. retailers have expressed concerns about consumer reluctance. Macy’s expects a slight drop in store sales, while Best Buy anticipates minimal sales growth at around 2 percent, with potential for price increases due to tariff impacts. CEO Corie Barry described the current market as being more volatile than merely influenced by tariffs, reflecting a pervasive uncertainty.
Target has forecasted stagnant sales growth for 2025 and has ceased its quarterly profit predictions due to anticipated economic volatility. Their financial chief, Jim Lee, signalled that performance expectations are shrouded in uncertainty, especially with possible downturns in consumer demand due to tariffs. This caution is mirrored in the stock market, with shares of Target and Best Buy suffering declines.
Abercrombie & Fitch reported a significant drop in their shares, plummeting by 16.5 percent as executives predicted that tariffs would affect both freight costs and consumer spending. Svec pointed out that mid-market retailers like Abercrombie are feeling the pinch of consumer anxiety more acutely than luxury or discount brands, leading to more conservative approaches.
Growth rates in discretionary retail sectors are hitting some of the lowest levels seen in the past year, noted Michael Gunther from Consumer Edge. Off-price retailers like Ross Stores, despite their lower exposure to tariffs, anticipate a challenging year ahead, estimating modest changes in sales. Burlington, too, is tempering its expectations despite a recent growth surge, highlighting the more cautious strategies that are becoming prevalent across the market.
As brands erring toward conservatism signal a potential slowdown across the retail landscape, Gunther indicates that even the off-price sector, typically more resilient, is facing growth slowdowns, suggesting a broader retail challenge ahead.
Retailers are lowering growth expectations due to economic uncertainties and declining consumer sentiment. Major chains like Macy’s, Best Buy, and Target anticipate flat or negative sales growth, reflecting worries over tariffs and changing consumer behaviour. Mid-market retailers are feeling the effects acutely and are adjusting strategies accordingly, while off-price stores expect a challenging year despite having previously outperformed. This conservative mindset indicates a broader slowdown in the retail sector.
The projections from major retailers paint a worried picture of the economic landscape, as cautious expectations take centre stage due to consumer sentiment and external economic pressures. Discretionary retailers particularly seem to be preparing for a year of challenges, marked by tightening budgets and an uncertain consumer base. Overall, the call for conservative management strategies suggests that the retail sector might be bracing for headwinds ahead.
Original Source: www.washingtonpost.com
