Inflation-wary shoppers pull back as goods pile up in stores

Bloomberg

Jude Snair knows retail. She works in the portrait department of a JCPenney at the Newport Centre mall in New Jersey. But with or without an employee discount, the 20-year-old said she was mostly avoiding holiday shopping this year.
“It’s looking more that people this year will be receiving homemade things,” Snair said as she filled out appointment sheets. She planned to cut her gift spending by more than half and vows to avoid Amazon.com, her main destination last year. “Do I even have the extra money to get stuff for people?”
It’s easy to understand her caution: The highest inflation in four decades is lashing consumers and pushing up prices for all of life’s necessities, not to mention the extras. Rising interest rates are pummeling the housing market, and war, extreme weather and extreme politics — not exactly the stuff of holiday spirit — are dimming the economic mood.
For the businesses that serve those skittish consumers, that means bracing for a slowdown next year that’s already threatening Wall Street jobs and inspiring warnings on earnings calls. The consumer pullback poses a particular existential threat for the retailers in the deepest financial trouble. More than $21 billion of bonds and loans tied to the industry trade at distressed levels, including debt for chain stores like Bed Bath & Beyond Inc and Party City Holdco.
The National Retail Federation had predicted a sales increase of 6% to 8% this holiday season but has seen lower-income consumers pull back.
That’s becoming evident in recent earnings reports from even some of the more resilient retailers, including Target Corp, which last month said third-quarter sales of discretionary items such as toys lagged and that it’s expecting a decline in fourth-quarter comparable-store sales as shoppers trim spending.
Inventory problems are adding to the stress. Retailers are still trying to offload piles of unsold goods after the pandemic delayed deliveries — with limited success.