Holiday Spending Soars: Will Retail Stocks Reap the Rewards?

Black Friday is fast approaching, offering key insights into consumer confidence and spending trends. If shoppers open their wallets generously, retail profits could exceed expectations, potentially boosting stock prices. Conversely, weak spending could signal trouble ahead for the retail sector.

In 2023, a record-breaking 200.4 million Americans shopped in stores or online from Thanksgiving through Cyber Monday, according to the National Retail Federation (NRF). 

Shoppers spent an average of $321.41 per person over the five-day period, totaling over $966 billion. Popular purchases included food, decorations, clothing, gifts, toys, electronics, and holiday deals.

For 2024, holiday spending is projected to hit another record, growing 3% compared to 2023. During the November-December shopping season, NRF estimates that the average consumer will increase spending from $875 to $902. 

Deloitte's holiday shopping survey is even more optimistic, forecasting an average expenditure of $1,778 per person—a notable 8% rise from 2023 and significantly surpassing pre-pandemic levels.

Strong Consumer Confidence Points to Retail Growth

With consumer confidence remaining robust, this year's Black Friday is likely to be another celebration for retailers. Online shopping is expected to take center stage, with 71% of consumers indicating they will shop online, according to Deloitte. Chinese e-commerce platforms like Temu, Shein, and TikTok Shop are offering especially aggressive discounts, possibly in response to uncertainties around their U.S. operations, aiming to capture market share.

Traditional retailers also remain important players. Over half of holiday shoppers plan to visit big-box stores, while about one-third will head to department stores.

Investment Opportunities in Retail Stocks

When it comes to investment, retail stocks are the obvious focus during Black Friday. Key players include e-commerce giant Amazon, brick-and-mortar leader Walmart, and the retail-focused ETF XRT, all of which are likely to reflect broader consumer spending trends this holiday season.

This year's Black Friday could serve as a litmus test for both consumer resilience and retail sector performance, offering opportunities for investors to capitalize on the holiday shopping frenzy.