Holiday shopping season: Expect a lump of coal in retailers’ stockings thanks to COVID-19

Brian Sozzi
·3-min read

The pivotal holiday shopping season is shaping up to be anything but merry for a nation of retailers that have struggled all year long with the effects from the COVID-19 pandemic.

On Tuesday, Adobe Analytics marked down its U.S. holiday season online sales growth forecast to 30% year-over-year from 33% previously. The data analysis firm expects the holiday season will pull in $184 billion in U.S. online sales.

The downward revision comes after Adobe said Cyber Monday sales rose 15.1% from the prior year to $10.8 billion, near the low-end of a prior forecast. On the positive side of the ledger, this year’s Cyber Monday represented the largest U.S. online shopping day in history — that surpassed last year’s record of $9.4 billion hit on Cyber Monday 2019.

Adobe’s Cyber Monday online read only serves to crystallize the less than inspiring start to holiday shopping for retailers. The sector is battling the one-two punch of consumers avoiding physical stores amid fear of getting sick and cautious spending online due to rising joblessness.

Holiday Fatigue. Inflatable Santa Claus with the wind knocked out of him. Might represent stress of the Christmas Season.
Holiday Fatigue. Inflatable Santa Claus with the wind knocked out of him. Might represent stress of the Christmas Season.

The National Retail Federation said Tuesday, consumers spent $50 less year-over-year on holiday gifts, food and decorations from Black Friday to Cyber Monday. The number of shoppers out and about spending during the Black Friday to Cyber Monday period fell by roughly 3.2 million versus last year.

Meanwhile, shopper visits to retail stores on Black Friday plummeted 52.1% year-over-year, per data from Sensormatic Solutions. Traffic fell 45.2% last week from a year ago.

“Although stores had limits in terms of capacity, there were no real lines outside of the stores (Best Buy had picked up when we visited Friday evening; but the line seemed to reflect some capacity limits); and finding a parking spot is the easiest it has been in 15 years of store checks,” points out Goldman Sachs retail analyst Kate McShane.

Adds McShane, “We think the lack of crowds was already a strong hypothesis going into Black Friday given the pandemic and the trend towards digital leading up to now; however we think promotions being pulled forward to early October (we think the kick off was Amazon Prime Days on 10/13-10/14) likely drove a lot of early and online shopping, resulting in possible reduced demand this holiday weekend.”

Faced with a tepid holiday season up to this point, investors who have bid up many retail stocks ahead of Black Friday (note: the SPDR S&P Retail ETF is up 20% over the past month) have a decision to make. Does one hold shares in the hopes consumers return in force in December? Or, do you cut bait as the slow start to the holidays likely means a host of bad news from the sector (store closures, earnings warnings, management changes, etc.) right on through January 2021.

We would be leaning toward the latter choice.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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