Walmart’s Early Holiday Card

Every year, they say, the holiday shopping season seems to come sooner. As it turns out, indications of what retailers can expect this season may be coming early too.

This week, Walmart provided some early signs when it posts its fiscal third-quarter earnings. As the largest retailer in the United States, the giant is considered a good proxy for consumer spending and confidence. National October sales reports figures arrived this week as well. And for both, the message seems clear: consumers haven't let up.

Walmart reported Thursday that its total revenue for the quarter ending Oct. 31 was $128 billion, an increase of 2.5% from the same period a year ago. CEO Doug McMillon said that the company is "prepared for a good holiday season." Meanwhile, retail sales increased 0.3% in October, after they stumbled in September.

Craig Rowley, a senior client partner and global practice leader for the consumer sector with Korn Ferry, say both reports show that though there is a lot of market talk about a looming recession, it isn’t impacting consumers. “Consumers manage money by looking at their bank accounts,” says Rowley, noting that unemployment remains at record lows and raises and bonuses will likely be higher this year than in years past. “As long as that looks good, they will keep carrying the economy.”

To be sure, despite the shortened holiday shopping season, retailers are expecting sales increases over last year. The National Retail Federation is projecting holiday sales to increase between 3.8% and 4.2% this year to around $730 billion, a sizable increase from the 2.1% growth last year. Denise Kramp, a senior client partner and retail sector leader for North America with Korn Ferry, says that retailers countered the fact that Thanksgiving falls so late this year by moving Black Friday deals to right after Halloween. “If they can keep sales going into November and not diminish last-minute shopping, it should be a win all around,” says Kramp.

While consumers have shown remarkable resilience so far this year, their confidence is not unshakeable. The October sales report indicated that consumers cut back spending at restaurants and stores that showcase big-ticket items such as appliances and furniture. Rowley says that geopolitical uncertainty, tariffs, the possibility of a presidential impeachment, and the wide diversity of ideas among potential presidential nominees, among other factors, all have the potential to impact consumer behavior in an instant. Part of the reason why Walmart’s earnings and the October retail sales report this week were so important is because any negative surprises in either report could have raised concerns about the economy and willingness of consumers to open their wallets.

Rowley says any unforeseen development, for instance a spike in gas prices or a sudden drop in the stock market, could scare consumers into saving instead of spending. “If something happens that immediately hits their wallet and cuts into the money they have to spend, they’ll get nervous. If not, they’ll keep driving the economy,” says Rowley.