Many see the consumer as strong currently, but we're about to get an honest check on that as holiday sales roll in for the season.
Goldman Sachs retail analysts say the holiday season could be a disappointment for retailers. In 2019, it has been the consumer, which accounts for the majority of U.S. GDP, that has upheld economic growth in the world's largest economy. In September, the consumer showed signs of weakness, as retail spend data showed a 3% decline in spending for September year-over-year. This badly missed estimates of 3% growth. Now, the always-telling holiday season is upon retail investors.
But Goldman cites a more benign reason for its warning. "Although recent spending momentum seems supportive of a healthy holiday season in 2019, our analysis points to potential headwinds from a shorter holiday calendar, especially when examining retailer results in prior periods when this dynamic transpired," the Goldman analysts wrote in a note out Monday morning. They mentioned that there will only be 26 days between Thanksgiving and Christmas in 2019, versus 32 days in 2018.
Goldman pointed to 2013 as a potentially representative year for predicting holiday sales in a short season. That year, the seasons was short and results were "challenging, the analysts said. Specifically, Walmart (WMT - Get Report) , Target (TGT - Get Report) and Macy's (M - Get Report) and Nordstrom (JWN - Get Report) reported a "deterioration" in same-store-sales for the fourth quarter. The analysts also noted income growth that year was "anemic," largely the opposite of what 2019 has seen out of wage growth.
The National Retail Federation, unlike Goldman, is expecting strong results. The NRF predicts between a 3.8% to 4.2% year-over-year increase in holiday sales for 2019, against the five year average increase of 3.7%. The NRF expects sales to total $727 billion and $730 billion.
"The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth," said NRF President and CEO Matthew Shay. Shay also mentioned consumer is facing risk as the global economy slows and, as the trade war remains a considerable worry, consumer confidence could see a downward jolt.
In addition to the stocks Goldman mentioned, here are some other notable holiday stocks to watch:
- Amazon (AMZN - Get Report)
- Etsy (ETSY - Get Report)
- MasterCard (MA - Get Report)
- American Express (AXP - Get Report)
- Apple (AAPL - Get Report)
- LVMH (LVMUY)