Analysts expect stores will struggle to sell winter merchandise and deal with excess inventory as they add new items for the season, which could cause more discounts and promotions, dragging on store margins.
Moreover, it’s not just brick-and-mortar retailers under pressure. Online retailers are also suffering. Adobe found that online retailers lost out on about $800 million in expected sales from the beginning of November through November 14 due to changing spending habits, writes Daniel B. Kline on Fox Business.
“Given the latest data, we are revising down our sales predictions for retailers. Similar to Brexit and its negative impact on consumer spending on durable goods in the U.K., U.S. consumers seem to hold off spending more online,”Adobe Digital Insight Principal Analyst and Director Tamara Gaffney said in a press release. “Instead of the expected 11% year-over-year increase, we expect growth to fall to single digits this year. Sales on Thanksgiving Day and Black Friday next week will be an important indicator of how much sales expectations need to be adjusted this shopping season.”
Consequently, the uncertain holiday season outlook could weigh on retail sector ETFs, such as XRT, which includes a hefty 25.1% tilt toward apparel retailers, 12.4% to internet & direct marketing retail and 7.3% to department stores.
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SPDR S&P Retail ETF