Walmart Inc. signaled a cautious outlook for the holiday season.
The mass discounter said on Wednesday that it plans to hire just 40,000 workers for the holidays, a 73.3 percent decline from the 150,000 it hired last year. Most of the hires are seasonal workers, but some also include full-time, permanent truck drivers. Target, meanwhile, is recruiting 100,000, on par with last year.
Walmart said it’s “offering additional hours to current associates who want them” before staffing up with seasonal help.
While Walmart last year added 20,000 supply chain workers and has invested in high-tech automation systems, the 150,000 hired last year tackled all facets of the customer experience.
But last year’s 8.5 percent holiday season growth marked the largest annual increase in 17 years, while e-commerce sales improved 11 percent over 2020, the result of pent-up demand after lengthy restrictions, according to Deloitte.
In contrast, consumers this year are grappling with inflation and the challenge of affording the essentials.
Walmart CEO Doug McMillon last month said the U.S. is seeing more affluent customers searching for value and bargains, which the retailer has in spades thanks to an inventory glut that forced it to cancel billions of dollars in orders.
Target similarly slashed $1.5 billion in “discretionary” receipts to fix its inventory mess. Kohl’s CEO Michelle Gass said last month that chain also has trimmed orders. Under Armour’s interim president and CEO Colin Browne described inventory problems as an “industrywide” challenge driving “a very promotional” market.
Even the Federal Reserve is having a hard time slowing inflation growing at a pace not seen in 40 years. On Wednesday, it raised interest rates by 0.75 percent, the third consecutive 75-basis-point hike. The increase takes the benchmark rate to a range of 3 percent to 3.25 percent, the highest since the Great Recession in 2008. And the Fed indicated that it could takes similar before the year is over.
Economists at Wells Fargo in a research note Wednesday said the median estimate for the fed funds rate is 4.6 percent by the end of 2023. They also said it appears that the Fed would likely welcome a “mild recession to get inflation firmly back” to its 2 percent target range.
Fashion vendors are worried about what holiday will bring. One fashion executive told Sourcing Journal the season “won’t be as good as 2021, but better than 2019,” when sales rose 4.1 percent from the prior year, according to the National Retail Federation, a retail trade group.
Deloitte is projecting holiday sales this year to increase between 4 percent and 6 percent, totaling between $1.45 trillion to $1.47 trillion during the November-to-January timeframe. E-commerce sales are expected to grow by 12.8 percent to 14.3 percent, year-over-year, reaching between $260 billion and $264 billion this season.
“The lower projected growth for the 2022 holiday season reflects the slowdown in the economy this year. Retail sales are likely to be further affected by declining demand for durable consumer goods, which had been the centerpiece of pandemic spending. However, we anticipate more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane,” Deloitte U.S. economic forecaster Daniel Bachman said.
Similarly, AlixPartners is forecasting a “tepid 4.0 percent to 7.0 percent” increase in U.S. holiday sales this year. It’s survey of more than 1,000 American consumers found that 30 percent plan to spend less this year than last, and that 39 percent plan to buy at least half their purchases on sales. The survey also found that 40 percent plan to do the majority of their shopping online.
“The watchwords for retailers this holiday season will be ‘affordability’ and ‘digital,'” Joel Bines, global co-head of the retail practice at AlixPartners, said. He said the consumer is worried about inflation and the possibility of a recession. “As a result, consumers will be holding out for deals this year, even as retailers themselves struggle with their own inflation and with massive inventories.”
In addition, a report from e-commerce platform Jungle Scout found that 55 percent of consumers plan to change their holiday shopping plans in response to inflation, whether that’s spending less, buying discounted products or reducing the number of people getting gifts. In addition, nearly 30 percent of consumers have started their holiday shopping, while 70 percent expect to start before Thanksgiving.