Retailers Brace For Record Returns Following Disappointing Holiday Sales

The holiday sales numbers are in and they are less than impressive.

What To Know: The National Retail Federation had predicted sales of nearly $1 trillion for the 2023 holiday season, but the latest figures show sales came in closer to $900 billion.

Forrester Research retail analyst Sucharita Kodali appeared on CNBC’s “Squawk Box” on Wednesday to discuss the sales data, as well as consumer sentiment.

Kodali attributed the lower-than-expected holiday sales numbers to weak consumer confidence as student loan payments have resumed and excess savings accumulated during the pandemic have been drained.

In addition to the weak sales data, retailers now face a record amount of product returns as the holiday season comes to a close, the analyst said. 

Physical retailers have a return rate of 15% on holiday purchases, while online retailers face return rates of 25% to 50%, depending on the retailer. Kodali noted that product returns are a “huge, huge cost center” for retailers.

Related News: Retailers Naughty Or Nice This Year? App Store Data Shows Early Holiday Shopping Trends

Looking Ahead: Kodail advised investors to remain cautious in the near term on companies in the electronics sector, which has been more heavily impacted by elevated inflation levels.

Despite inflation concerns and weak consumer sentiment, Kodali expects some of the major retailers to outpace industry trends, including Walmart, Inc. WMT and Amazon.com, Inc. AMZN.

The retail analyst also has high expectations for Lululemon Athletica, Inc. LULU heading into 2024 compared to competitors in the apparel sector.

Image: Megan Rexazin Conde from Pixabay