Did holiday promotions drive gains or only pain?

In the first major assessment of holiday selling, Mastercard estimated U.S. retail sales grew 7.6 percent year-over-year from November 1 through December 24. The performance topped Mastercard’s prediction that called for a 7.1 percent increase but fell short of last year’s 8.5 percent gain.

Mastercard SpendingPulse measures in-store and online payments and is unadjusted for inflation.

The 2021 holiday season benefited from pent-up demand, pandemic-supported savings, and concerns over inventory shortages. This year, sales were expected to be supported by a healthy job market and rising wages, but decades-high inflation and the threat of a recession were seen weighing on shoppers’ minds.

Promotions were also being closely watched as Amazon, Walmart and others aggressively discounted early in the season to rebalance ballooning inventories that were partly due to overbuying before supply chain pressures began to ease, as well as in response to softer consumer spending. Unknown is to what degree the promotions will affect retail earnings that will start being reported n February.

“Retailers discounted heavily but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic,” said Steve Sadove, senior advisor for Mastercard and Saks’ former CEO, in a statement.

Channel checks by Wells Fargo indicated that Black Friday traffic had decelerated to the typical seasonal lull, dashing hopes by some that a late surge would arrive this year as cautious holiday shoppers hunted for last-minute deals.

Wells Fargo’s analyst Ike Boruchow wrote in a note last week, according to Seeking Alpha, “The key issue we see today is that a potentially weak holiday will lead to much greater investor caution entering 2023 due to elevated 4Q EPS risk, a very challenging 1Q setup looming (compares don’t ease until 2Q/3Q) and the fact that companies will likely take a more conservative approach to initial guidance.”

• Mastercard SpendingPulse: U.S. Retail Sales Grew 7.6 percent* This Holiday Season – Mastercard
• Mastercard SpendingPulse: U.S. Retail Sales Expected to Grow 7.1 percent* This Holiday Season – Mastercard
• Mastercard SpendingPulse: U.S. retail sales grew 8.5 percent* this holiday season – Mastercard
• Retail Sales Fell in November, Despite Black Friday – New York Times
• Sluggish holiday sales could bring huge last-minute discounts – Lincoln Journal Star
• Retail Sales Fell in November, Despite Black Friday – New York Times
• Holiday sales surge not likely in the cards – Seeking Alpha