“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.