The US retail industry is bracing for another blow as Halloween spending is set to take a hit this year. According to a recent report by Bloomberg, the National Retail Federation predicts a 5% decrease in US Halloween expenditure, bringing the total down to $11.6 billion. This decline is expected to be most significant in the sales of greeting cards and costumes, categories that many retailers rely on for seasonal revenue. This news comes at a challenging time for the retail sector, which is already grappling with increased overheads and a consumer shift towards cheaper products.
The economic headwinds of inflation and high unemployment rates have particularly impacted lower-income households, forcing them to tighten their belts. This is evident in the recent earnings call of Michaels Cos. (MIK), which pointed out that households earning less than $100,000 are reducing their spending, resulting in smaller shopping baskets. This trend is a major concern for retailers, especially those heavily reliant on discretionary spending.
Several struggling companies, including Michaels and At Home Group Inc. (HOME), are under the ownership of private equity managers. These firms are facing difficulties due to poorly timed buyouts during the pandemic, coinciding with surging interest rates and inflation, which strained household budgets. Despite the challenges, both Michaels and At Home remain optimistic about capturing a larger share of holiday spending. However, the overall spending cutback is posing significant challenges for the wider industry, leading to a series of high-profile bankruptcies this year.
The predicted decrease in Halloween spending is a stark reflection of the ongoing economic challenges faced by US households. The retail sector, already hard hit by the pandemic, is now grappling with reduced consumer spending. This situation is particularly concerning for firms owned by private equity managers, who are already struggling with the repercussions of ill-timed buyouts during the pandemic. The current economic landscape demands strategic planning and innovative solutions for retailers to navigate these challenging times.
