• by Sarah Mahoney  @mahoney_sarah, January 4, 2024

For all the fretting about consumers cutting back, retailers finished the holiday season on solid footing. Sales seem to have come in much as forecast, with Mastercard SpendingPulse reporting that U.S. retail sales increased by 3.1% from November through December.

Still, Moody’s says some U.S. retail and apparel companies are on dangerous ground, with a credit rating of Caa 1 and below.

And while this year’s “watch” list is much shorter than in recent years, it’s also got big names. As of Jan. 2, that list included Joann Stores, with a negative rating, and 99 Cents Only Stores, Belk and Carvana, all rated as stable.

In a year with large-company bankruptcies, including Rite Aid and Bed, Bath & Beyond, CBS reports that more than 4,600 stores closed last year. Citing Coresight Research, CBS says this marks an 80% increase in closings from the prior year. Yet 5,500 stores also opened, making it a relatively good year for brick-and-mortar companies.

And experts are upbeat about what’s ahead as inflation retreats and the labor outlook remains strong.

“This holiday season, the consumer showed up, spending in a deliberate manner,” said Michelle Meyer, chief economist, Mastercard Economics Institute, in its year-end report. “The economic backdrop remains favorable with healthy job creation and easing inflation pressures, empowering consumers to seek the goods and experiences they value most.”

Online sales rose 6.3%, outpacing in-store revenues, up 2.2%. Sales of apparel gained 2.2% and grocery, 2.1%. Restaurant spending jumped 7.8%.

That’s not to say there aren’t still weak spots. Circana reports that in November, spending on discretionary general merchandise and consumer packaged goods dipped 2% from the same month in 2022, with unit sales sinking 3%. The declines were most significant in discretionary general merchandise spending, dropping 7% in dollars and 5% in unit sales.

“Consumers have changed the way they are shopping in response to what is going on around them, focusing their shopping energy on getting what they need at a value,” writes Marshal Cohen, chief retail industry advisor.

“The combination of continued price elevation, the resulting economic challenges that remain from the past few years, and the absence of newness and purchase urgency at retail have resulted in a more relaxed approach to shopping — even at the holidays.”