Recently, we wrote about how retailers were likely to run into a "shallow" for the next few weeks until we got to the holidays because of an exhausted consumer and stretched pocketbooks. Over the past week, we have read more anecdotes of the “shallow” widening. However, we also noted that if the economy continues to signal expansion, and if grocery prices break meaningfully lower, this holiday season could be particularly good on a year-over-year basis because last season was particularly soft (at its start and it didn’t break until the preceding two weeks before Christmas--you can read our summary of Holiday 2022 here.) We wanted to revisit visitation trends ahead of this year's holiday season using Target as a proxy for the industry.
Below we show Target’s September-September traffic from 2017-2023 on a trailing-four-week basis. What is striking is the large lift in visits that the retailer experienced during the Holiday 2021 compared to pre-pandemic levels and Holiday 2020. After Holiday 2020, traffic rolled over quite quickly, which likely reflects the pandemic. Spring and early summer 2022 were up nicely versus 2021 until July, when traffic narrowed to the prior period. This past back-to-school season brought visits back to 2022's level after a softer May-June 2023. Given the early high base of Holiday 2021 and 2022, it would seem reasonable for holiday spending to appear soft again until we get into crunch time.
We also looked at Target’s traffic from a sequential trend below. This chart clearly shows an unusually early start to Holiday 2021, a time when consumers were concerned about product availability. Moreover, one can see that Holiday 22 had a far slower and muted ramp. All three pre-pandemic periods produced much stronger post-holiday activity, on a relative basis, than the three periods following.
When thinking about January 2024, it's worth remembering that January 2023 was an unusual month--many retailers offered deep and disruptive discounts to clear through goods and lower inventory levels before their fiscal years ended. Those offering disruptive prices took share and pulled forward demand from the subsequent months (see our comments here). As such, we’d expect the month of January 2024 to come in soft in general, not just Target. However, from there the momentum should improve.