Topline
American consumers exceeded expectations in 2024 holiday retail spending, giving retailers a jump start into 2025.
Key Facts
November-December holiday retail sales grew an “unexpectedly high” 4% over 2023 to reach a record $994.1 billion, according to the National Retail Federation’s (NRF), which initially projected between 2.5% and 3.5% growth. NRF’s holiday retail sales exclude autos, gas and food service retailers.
Online and non-store retailers led the industry, with sales up nearly 9%. Even furniture and home furnishing stores, which have been underwater all year, rose 5.6% in the holiday season. However, building materials and hardware stores remained flat.
In total, retail contributed $5.28 trillion to the U.S economy in 2024, another record. Sales rose 3.6% year-over-year, leveling out after the 2020-2022 pandemic swings. Between 2010 and 2019, retail growth averaged 3.6%.
NRF estimates that returns could total $890 billion in 2024, with the heaviest returns expected post-holiday, so final year-end numbers will need adjusting. Returns could reach as high as 17% of retail sales, well over the 13% average from 2019 to 2022.
Big Question
Can U.S. consumers keep up their heady retail spending in 2025?
Crucial Quote
Background
Going into the peak holiday shopping season, American households were $17.9 trillion in debt as of third quarter 2024, according to the Federal Reserve Bank of New York. Credit card debt, which powers much retail spending, reached $1.2 trillion, up 8.1% over previous year.
GlobalData’s Neil Saunders observed in a LinkedIn post that his company’s data showed the amount purchased in December on credit cards, especially using buy-not-pay-later (BNPL) options, was up “sharply.” He added that more purchases this year were made at a discount, cutting into retailers’ margins.
Contra
After rising in November, consumer confidence took a downward turn in December, according to The Conference Board. In particular, consumers were less optimistic about business conditions, labor market outlook and their income prospects. While they see less likelihood of a recession in the next twelve months, their family’s expected financial situation turned darker too.
What To Watch For
Saunders expects “polarized” earnings reports as retailers tally final 2024 results. For example, Wall Street Journal reports that over the previous three quarters, the nation’s largest retailers – Walmart, Amazon and Costco – accounted for 17% of retail sales and generated nearly 60% of retail sales growth in the period.
US retail sales exit 2024 with momentum; labor market on solid ground (Reuters, 1/16/2025)
People are still refreshing their Covid wardrobes to return to the office (NBC News, 1/12/2025)
Big retail gets bigger as smaller players struggle (Wall Street Journal, 1/2/2025)
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