Wells Fargo Predicts Weaker Than Normal Holiday Shopping Season for 2019

High inventory levels, less tourism, and a shorter holiday may lead to weaker sales.

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Wells Fargo, the world’s fourth-largest bank and financial services firm, is anticipating a weaker than average holiday shopping season in the coming months. This, despite retailers’ expectations that the fourth quarter will bring brisk business as usual.

Ike Boruchow, a senior analyst at Wells Fargo, implied that the holiday set up for 2019 is bearish, leading his team to remain cautious, in spite of many retailers being optimistic about growth in the final quarter. 

Wells Fargo believes the underlying trends are changing. Retail inventory levels are high, less money has been spent on tourism, a warmer than usual winter season has been predicted, and this year, we’ll have an abbreviated holiday calendar. These could all factor in on fourth-quarter sales.

Earlier this year, many retailers said they expected to see acceleration during the fourth-quarter sales. 15 out of the 18 companies Wells Fargo evaluated were banking on strengthening sales at the end of the year. But, Wells Fargo views things differently.

“We see risk ahead — a group with downward momentum on fundamentals calling for accelerating trends 3 months from now, with building inventory in the channel, an unfavorable holiday calendar ahead and likely headwinds coming from tourism and weather,” said Boruchow.

Burochow points out that there are six less shopping days between Thanksgiving and Christmas this year. In particular, this could harm domestic companies. And a warmer winter could negatively impact companies that sell winter-related items, such as parkas and ski equipment.

While the U.S. dollar is relatively stronger than its foreign counterparts, this could mean less tourism coming into the U.S.

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