Key Walmart and Target data signals ‘red flag’ for US economy ahead of holiday season amid retail apocalypse

Major retailers are sending warning signals ahead of what is expected to be a lackluster holiday season.

This week, Target said it expects a quiet holiday shopping season, raising concerns among some retail investors.

The company forecast on Wednesday that sales will be flat in the final quarter of the year, and executives lowered their profit forecast from last quarter.

This news sent Target’s shares plummeting just before a crucial time for the retail sector.

Walmart, among others, has also reportedly brought in fewer holiday products for the upcoming season.

That’s despite the company saying on its latest earnings call this week that it is well positioned and has “momentum” heading into the holiday season.

The retail giant beat Target in the latest quarter, posting 5.5 percent revenue growth along with a 27 percent increase in global e-commerce sales. It also raised its financial expectations for the rest of the year.

But experts warn that bringing in fewer products could be a red flag for the health of the U.S. economy. It means big stores are cutting back on inventory based on the forecast that inflation-weary Americans will buy less.

Walmart’s import volume of holiday-themed products, including decorations and toys, fell sharply, from 3.1 million pounds in 2022 to about 700,000 pounds in the 12 months ended September 30.

In 2023, the import volume amounted to 980,000 kilos, according to trade data platform ImportYeti.

This decline reflects a larger trend in the US, with total imports of holiday items down 22 percent compared to last year.

Retailers appear to be bracing for weaker consumer demand, with price-conscious shoppers favoring essentials over holiday splurges.

The National Retail Federation (NRF) already predicted a modest increase in holiday spending of 2.5 to 3.5 percent, the slowest growth since 2018.

Walmart and other major retailers, such as Dollar General, are exercising caution to avoid inventory overload during the recent holiday season – a situation that led to steep discounts and eroded profit margins.

Walmart investor Sizemore Capital Management said Walmart routinely scrutinizes customer spending habits data, including credit card information.

‘They have done the research about their consumer. And what they have concluded is that the holidays are not going to be as strong,” said Charles Sizemore, chief investment officer at the company.

While the holiday import data doesn’t include electronics, clothing or other general goods, what it shows is “pretty clear,” he added.

“If Walmart orders less, they expect tepid sales.”

A Walmart spokesperson said the data “paints only a partial picture of what we obtain due to the exclusion of marketplace data, national brands, and domestic importer data for private labels, among others.”

It comes after former Target vice chairman Gerald Storch predicted in October that the retail industry is in for a tough few months.

Walmart’s import volume of Christmas-themed products, including decorations and toys, has fallen sharply, from 1.9 million kilos in 2022 to about 340,000 kilos this year

Former Target CEO Gerald Storch has issued a dire warning about the shopping season

This week, Target said it expects a quiet holiday shopping season, raising concerns among some retail investors

“It’s very clear that consumers are running out of money,” Storch said Fox Business.

“They are increasingly stressed by inflation and the depletion of their pandemic-era savings… they are spending less than inflation growth,” he added.

Target, much more than its main competitor Walmart, relies on sales of discretionary goods such as home decor, electronics and clothing to make a profit.

More than half of Target’s merchandise is discretionary, CNN reported, and these are exactly the items consumers are abandoning in favor of groceries and daily necessities.