Big discounts are coming this holiday season

Few of us want summer to end, but there’s some good news coming this winter holiday: you’ll find more discounts than in previous holiday shopping seasons. Executives at Best Buy (BBY), Ulta (ULTA), Gap (GPS) and other top chains have said in recent weeks that they are expecting a shopping season packed with discounts. Walmart (WMT) on Tuesday released its annual top toy list and said it was offering more “rollbacks” — temporary price reductions on items — than in previous years and a wider array of toys for less than $50 and $25. In addition to toys, shoppers will likely find discounts on clothing, televisions, beauty products, sporting goods and other items. Some chains have stockpiled too much inventory in recent months and will increase promotions to try to sell the glut of goods during the holiday stretch. Other companies are also ramping up promotions to give incentives to inflation-strained shoppers who might otherwise be priced out of holiday gifts. “We expect it to be more competitive, more promotional this year than it was a year ago,” Ulta beauty finance chief Scott Settersten told analysts on an earnings call last week. Best Buy’s executives said Tuesday that its own inventory levels are healthy, but competitors carrying excess consumer electronics are discounting them to lure shoppers who are feeling pinched by inflation. “We’re seeing a customer who’s more value-oriented, who is definitely moving more towards some of those sale events,” CEO Corie Barry said on a call with analysts. Barry expects the holiday shopping rush to start later in the season than a year ago. “You’re going to see a holiday that starts to look a little bit more like what we saw pre-pandemic,” she said. Retailers are not “where they want to be with regards to inventory levels, which will necessitate more discounting,” Jonathan Matuszewski, a retail analyst at Jefferies, said in a note to clients Tuesday. He expects a “fiercely promotional holiday.” Although shoppers love discounts, they’re unloved by retailers because they eat into profits. Some chains, such as Kohl’s (KSS) and Gap (GPS), are instead packing away their excess inventory and plan to sell it in future seasons. It’s unclear whether holiday discounts will be compelling enough to spur inflation-conscious shoppers to buy, however. A host of retailers in recent weeks have said lower-income customers are shifting their purchases away from discretionary goods toward necessities like groceries and household basics. Some higher-income consumers are tightening their spending as well. “High income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables,” University of Michigan researchers wrote this month.