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Holiday Sales Surpass Forecasts, Reflecting Consumer Rebound

Accelerating rapidly after a decade of mediocre growth, retail spending growth is seeing its best performance since 2005, with widespread gains both in stores and online, across all major formats, according to longtime retail researchers Customer Growth Partners.

Based on CPG’s primary research tracking America’s 50 largest retailers through field surveys across benchmark shopping venues nationwide for the holiday period, consumers are spending at a pace not seen since before the recession. Drawing on results of the November-December research CGP estimates that total holiday spending reached a record $672 billion, fractionally above CGP mid-December forecast of $671 billion, a 5.7% year-0ver-year increase. [CGP’s forecast excludes autos/parts, gasoline/fuel oil, and restaurants. Estimates are based on detailed shopper surveys at over 50 of the nation’s 50 largest retailers, conducted in over 90 benchmark mall and off-mall shopping venues.]

With the holiday results boosted by record sales in the Christmas to New Year’s week — retail’s “Second Season” — the robust spending is evident across all demographics, not just upper income quintiles. Holiday 2017 showed broad-based momentum across the board: across all demographics, all major merchandise categories, across formats from big-box to specialty, and across channels — whether online or in-store. With the broad-based sales growth and rising real disposable incomes — and now the new tax cut legislation — all the ingredients are in place for a sustained rebound in consumer spending well into 2018 and perhaps beyond.

Holiday sales were paced by:

• Online/direct-to-consumer sales: up 11.7%
• Home improvement: up 9.5%
• Off-price stores: up 8.4%
• Superstores/clubs: up 5.6%
• Apparel: up 5.1%

Not all retail sectors thrived, however, with women’s apparel retailers and sporting goods seeing sluggish sales at best. Department stores, while far lagging peak performance levels of many years ago, accelerated strongly from prior dismal results, with improved same-store-sales seen at many stores — albeit enabled by multiple store closures.

The hottest products of the season include:

• Apple’s iPhone X, iPhone 8-Plus, Air-Pods and Series 3 Watches
• Nintendo Switch
• Microsoft’s X Box One-S
• WowWee’s Fingerlings—near-impossible to find, with new shipments before Christmas
• Squishies (multiples sources)
• Spinmaster’s Hatchimals, Air Hog drones, and PAW Patrol Lookout Tower
• Hasbro’s NERF and Star Wars/Last Jedi toys
• Sweaters (perennially the top gift item)
• Biggest self-gifting items:  women’s boots and ripped jeans.

Holiday 2017 turned out to be a home run, with results far better than consensus expectation. This Christmas may well mark the beginning of a very strong and sustained consumer-led recovery — and this was before most consumers focused on the new tax cuts. After years in hibernation, consumers — accounting for 70% of GDP — are flexing their spending muscles. In short, the coming consumer boom is already here.

Craig Johnson is president of Customer Growth Partners,  a consulting and research firm serving the retail industry.  Founded in 2001, CGP conducts both proprietary and public forecasts of annual, back to school and holiday retail sales.

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