What to expect from the retailers this holiday quarter?

on Nov 25, 2022
  • Former Macy's CEO says retailers will have record sales this holiday season.
  • He explained his bullish thesis this morning on CNBC's "Squawk Box".
  • U.S. Retail sales were up a better-than-expected 1.30% in October.

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Retail space will remain incredibly strong this holiday quarter despite fears of a looming recession, says Terry Lundgren – the former Chief Executive of Macy’s.

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Reason why Lundgren is bullish on the retail space

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Last week, the U.S. Census Bureau said retail sales in October were up 1.30%; better than a 1.0% gain that economists had forecast.

And thanks to $1.60 trillion worth of excess savings, Lundgren noted this morning on CNBC’s “Squawk Box”, that strength will likely continue through the end of 2022.

Consumer still has money. The higher income households have plenty to spend. They’ll spend on luxury accessories and fragrances and the middle-income households which are really critical have money too.

According to the National Retail Federation, holiday sales are expected to be up between 6.0% and 8.0% on a year-over-year basis.

Lundgren expects retailers to report record sales

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On the back of strong retail sales, the Atlanta Fed recently raised its forecast for economic growth in the fourth quarter to 4.40%.

More importantly, inflation also seems to be coming down as Invezz reported here, which could see the central bank take a pause from aggressively lifting rates. Put together, that signals a possibility of only “mild” recession next year – if not “no recession”.

Such a narrative could also contribute to continued spending this holiday season, especially since many retailers are still wrestling with excess inventory and are turning to markdowns to clear it before year-end. Lundgren added:

It’s been a good year for retail. We’re going to finish these next six weeks strong as well. At the end of the day, we’ll end up with record sales this holiday season.


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