US holiday sales set to top $1 trillion for the first time, NRF forecasts

The National Retail Federation (NRF) forecasts U.S. holiday sales to exceed $1 trillion for the first time, projecting 3.7%-4.2% growth to $1.01-$1.02 trillion, a deceleration from last year's 4.3% increase. This moderated outlook is driven by persistent inflation and trade policy uncertainties, leading to cautious consumer spending and subdued forecasts from retailers such as Tapestry and Under Armour, alongside a projected decrease in seasonal hiring.

Analysis

The National Retail Federation (NRF) projects U.S. holiday sales to reach a record $1.01 trillion to $1.02 trillion, marking the first time sales will surpass the $1 trillion threshold. However, this represents a growth rate of 3.7% to 4.2%, a deceleration from last year's 4.3% increase to $976.1 billion, indicating a moderated outlook for the crucial selling season. This forecast spans November through January, encompassing key shopping events.

This slower growth is primarily attributed to persistent inflation and the impact of trade policies, which are fostering cautious consumer sentiment regarding extravagant purchases. NRF Chief Economist Mark Mathews noted that tariffs have induced an uptick in consumer prices, leading retailers to hold the line on pricing amidst trade policy uncertainty. NRF President and CEO Matthew Shay acknowledged cautious consumer sentiment despite fundamental strength.

Several retailers, including Tapestry (TPR.N), Under Armour (UAA.N), and Canada Goose (GOOS.TO), have already issued subdued forecasts for the period, reflecting anticipated consumer restraint. Furthermore, seasonal hiring expectations are lower, ranging from 265,000 to 365,000 workers, below the 442,000 hired in 2024, signaling a slower-paced labor market and reduced retail demand.

Key Decisions for Investors

• Monitor consumer discretionary spending trends closely, particularly for retailers exposed to higher-priced goods, given the cautious sentiment and inflation pressures.
• Evaluate retail sector holdings for companies with strong inventory management and pricing power to mitigate the impact of rising input costs and potential demand softness.
• Assess the sensitivity of portfolio companies to ongoing trade policy developments and tariffs, as these factors are directly influencing consumer prices and corporate guidance.