Yahoo Finance's Brian Sozzi explains why inflation and slower consumer spending could weigh on retailers' profits this holiday season.
JULIE HYMAN: The holiday shopping season is upon us. But with consumers feeling the pinch in their wallets, it's shaping up to not be such a jolly season for businesses. That's where we find Sozzi's take today. Sozz, is this from the Morgan Stanley note?
BRIAN SOZZI: No, it's from a Citi note.
JULIE HYMAN: Oh, because they had mentioned Grinch-- the Grinch also.
BRIAN SOZZI: Well, I mean, I'm very creative here. So [INAUDIBLE] our producer Ivana really went to town on this one. So let's fire some charts here. 2,500 people were surveyed by Citi. And rule of thumb for me, any time a survey is over 500 people, I will tend to mention it on air. And this one had 2,500 people, so obviously I'm mentioning it on air.
First up, concerns of inflation impacting holiday purchases. Citi found there are a lot of consumers right now, especially amongst those higher income consumers, which we have talked about all week, starting to pull back on their purchases. They are quite concerned about just their overall financial standing and how they might spend this holiday shopping season.
Let's fire that next chart here. Next chart is spending, why they are spending-- why they may or may not spend this holiday season. Some of them are just the main concern is they have less money. Whether that is because the stock market is down, whether that's because they've got blown up on crypto trades, whether that is because they have been going to the store every week and getting clipped by inflation, whatever the reason, they have less money. And if you have less money into the holiday season, you are likely to spend less on various gifts.
But they're also just concerned, I think, by other things. The items are still too expensive. So they're inclined to wait out a promotion. That is something we heard from Target earlier in the week. CEO Brian Cornell said consumers are waiting for a good deal. And if they do not get that deal, they are not out here buying.
And lastly, this chart from Citi, overall average spending to fall in 2022. You can see that on the right hand side that spending is pretty much slated-- at least from Citi's survey-- slated to fall across the board by various income demographics. Ironically, though, those families that earn about under $25,000 may be spending just a little bit more, but nonetheless--
JULIE HYMAN: Because they have to probably.
BRIAN SOZZI: Because they have no choice. That's a very good point. Prices are up across the board, Julie. But my take is this. It could be a concerning holiday season. There I am. A hat tip to our producer Ivana, just crushing it here with this graphic. That is me as the Grinch. Here comes the deals.
We heard it from Gap's earnings. We heard it from Ross Stores, heard it from Target, heard it from Walmart. All the deals are going to be out there, and it is all likely to come at the expense of profit margins. You can see-- you're going to likely see big discounts. The next retailer I think you're going to hear about big promotions, big discounts, is Best Buy, when they report earnings in a few days.
BRAD SMITH: Yeah, a lot of electronics. And electronics was a theme. An underlying theme, common denominator, across the earnings reports was they were struggling. Walmart, Target struggling to sell through electronics. I can't get past the hair in this graphic, though.
BRIAN SOZZI: Yeah, I mean, that's me. I mean, that's my vibe today heading into the weekend. It's been a long week here. We've got a lot of retail earnings. And, you know, I'm just feeling very Grinch-like. That's tough work. That's amazing. I'm going to put that on my LinkedIn profile.
BRAD SMITH: I might make this my avatar on Twitter.
BRIAN SOZZI: I think you should.
BRAD SMITH: --stay up there, but it'll be there.