According to the National Retail Federation’s annual survey, 2023 will see record high Halloween spending in the U.S. of $12.2 billion. Halloween is the second biggest holiday of the year for decor, and consumers typically start preparing as early as September. This year marked a change in consumer behavior, with Halloween sales starting as early as the second quarter. Find out what’s driving this change and how it will impact holiday spending for the rest of the season.
“Consumers remain choosy but are clearly not as stressed as some had expected … [they] are spending around holidays and events. Halloween looks like a gainer so far.”
While sales predictions for Halloween are favorable, consumer spending patterns earlier in the year had cast some doubt. In the second quarter, earnings for retailers within J.P. Morgan’s coverage universe were largely underwhelming. “Of the 21 retailers we track, 15 experienced year-over-year revenue declines, versus only six growers,” said Carla Casella, who leads the U.S. High Yield Consumer Products, Food and Retail team at J.P. Morgan. “This has made our outlook for the rest of the year much more uncertain.”
Here are the key trends shaping Halloween spending and beyond as consumers enter peak holiday season.
“Most of the retailers we cover are planning the back half of 2023 cautiously given the choppy consumer environment. Consumers are pulling back and tightly managing their money. Right now, they are juggling a lot more with less savings, higher rates and student loan repayments,” Casella said. “With so many moving parts, and the consumer deciding where to spend every month, it’s hard to tell how the retail sector will perform this holiday season. Our early read is that holiday sales will be up in the low- to mid-single digits overall, largely driven by prices, but it will be interesting to see which categories will gain ‘share of wallet.’ We think Halloween sounds like a gainer so far.”
This year, retailers are taking advantage of supply chain efficiency to display Halloween goods earlier, following previous disruptions that made it difficult to predict when shipments would come in. Many retailers have had Halloween stock on the shelves since the second quarter, offering products at full price. Home Depot management commented that during the second quarter, a “sneak preview of our Halloween lineup was a tremendous success.” Craft stores from Jo-Ann to Michaels are displaying Halloween early, with Jo-Ann calling out a “deliberate pull forward of our Halloween seasonal product offering” and Michaels adding helium balloons to many of its stores (Party City was previously the largest seller). “I would refer to this as more ‘opportunistic’ selling, since retailers now have the supply chains to support them,” Casella said. “They are putting full-price items in front of consumers who want to get ahead of the season and avoid the last-minute scramble that often comes along with discounts. Peak Halloween selling will still be in October, so we won’t know how successful the strategy has been until after October 31.”
Overall U.S. retail sales show mixed trends. U.S. retail sales from September beat expectations at +0.7% versus +0.3% expected, with year-over-year sales tracking +3.4% for both August and September. However, six out of 10 non-durable categories decelerated on a year-over-year basis including general merchandise (+3%), grocery (+2.1%) and clothing (+0.8%). Three categories showed year-over-year sales declines including electronics (-2.5%), sporting goods/books/hobby (-1.6%) and miscellaneous (-0.8%), revealing some consumer hesitance.
“Consumers remain choosy but are clearly not as stressed as some had expected,” Casella noted. “They were spending and going out this summer — traveling, going out to dinner — and while restaurant sales grew 9.7% in September, some of this spend will shift back to stores and goods over the holidays. We expect seasonal purchases to pick up closer to the time. Consumers are spending around holidays and events.”
However, momentum around Halloween may not lead to a big lift in sales overall as it is just one season. Even as the consumer is spending more each year on this important holiday, Party City — historically one of the largest sellers of costumes and Halloween decor in the U.S. — fell into bankruptcy, only recently reemerging with a smaller store base. One problem was that Party City was too dependent on Halloween, leaving itself exposed during the “tweener” season (sandwiched between back-to-school and the holidays) when it needed to discount products to drive traffic. In a similar vein, Michaels noted that while it is seeing a solid start to Halloween, early sales may not be enough to offset general traffic softness. The retailer expects third-quarter same-store sales to be lower than its second-quarter same-store sales of -5.4%, though it could be under-promising to over-deliver.
Back-to-school and Halloween spending are the best barometers available for holiday sales. At this point in time, holiday season spending growth looks likely, but it is probably not going to be a blockbuster year. “At this early stage, it looks like we should have an ok holiday season,” Casella said. “Not amazing, but it should not fall flat. I would forecast holiday sales to be up in the single digits, low or mid-range. 2-5% seems realistic.”
Keep up with the latest holiday retail trends — J.P. Morgan’s full seasonal retail outlook is coming soon.
What’s next for the luxury market?
April 27, 2023
The luxury market should see two vastly different dynamics playing out in the coming months. How will this impact luxury shoppers and brands?
Deflation in China: The spillover effects for global markets
September 28, 2023
What’s the impact of China’s deflation pressures, and will prices continue to fall?
J.P. Morgan’s Research team leverages cutting-edge technologies and innovative tools to bring clients industry-leading analysis and investment advice.
This communication is provided for information purposes only. Please read J.P. Morgan research reports related to its contents for more information, including important disclosures. JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively, J.P. Morgan) normally make a market and trade as principal in securities, other financial products and other asset classes that may be discussed in this communication.This communication has been prepared based upon information, including market prices, data and other information, from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy except with respect to any disclosures relative to J.P. Morgan and/or its affiliates and an analyst's involvement with any company (or security, other financial product or other asset class) that may be the subject of this communication. Any opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This communication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. J.P. Morgan Research does not provide individually tailored investment advice. Any opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. You must make your own independent decisions regarding any securities, financial instruments or strategies mentioned or related to the information herein. Periodic updates may be provided on companies, issuers or industries based on specific developments or announcements, market conditions or any other publicly available information. However, J.P. Morgan may be restricted from updating information contained in this communication for regulatory or other reasons. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.This communication may not be redistributed or retransmitted, in whole or in part, or in any form or manner, without the express written consent of J.P. Morgan. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute or retransmit the contents and information contained in this communication without first obtaining express permission from an authorized officer of J.P. Morgan.