Retailers enjoyed solid end to 2024, but 2025 brings new challenges

The news: Retail sales rose 0.4% MoM and 3.9% YoY in December, per the US Commerce Department—marking a solid end to a solid year for retail spending.

• Control group sales—which exclude food services, auto dealers, building material stores, and gas stations, and are used in GDP calculations—increased 0.7% MoM, the strongest growth in three months. That beat analysts’ expectations for a 0.4% rise.
• On an annualized basis, control group sales rose by a healthy 5.4% the last three months of the year.

Behind the numbers: Eleven of the 13 categories tracked by the Commerce Department had a YoY uptick in sales, led by motor vehicle and parts retailers, as well as furniture and home furnishings stores. Nonstore retailers also had a strong December, aided by a banner Cyber Monday and deep holiday discounting.

While some retailers—most notably department stores—had a lackluster holiday season, others reported a solid end to the year, fueled by discounts as well as renewed interest in big-ticket purchases.

• Target joined Abercrombie & Fitch, lululemon athletica, and Nordstrom in raising its Q4 outlook, which it credited to a “meaningful acceleration in discretionary categories” as well as 9% YoY ecommerce growth during November and December. The retailer now expects Q4 comparable sales to rise 1.5% YoY, up from its previous forecast of roughly flat. However, it stuck by its profit guidance, an indication that it relied more heavily on discounts to motivate shoppers.
• Richemont’s Americas revenues jumped by 22% YoY in the holiday quarter, fueled by strong US demand, the Cartier owner said. Likewise, ultra-luxe brand Brunello Cucinelli reported a 17.8% YoY increase in Americas sales, as higher-income consumers continue to spend.

What lies ahead: Retailers face a more complex and uncertain landscape in 2025—mainly due to the lack of clarity surrounding President-elect Donald Trump’s tariff plans. The likelihood that those policies will cause prices to rise and reignite inflation is pushing many consumers to pull forward big-ticket purchases and, in some cases, stockpile items like cosmetics, home goods, and nonperishable groceries.

It’s also affecting their outlook on future spending.

• Over half—52%—of consumers say that rising costs due to tariffs or a trade war would significantly alter their purchasing behavior, per a First Insight survey.
• Roughly one-third (31%) would prioritize essential items only, 25% would buy fewer items, and 16% would trade down to private labels.

In contrast, high-income consumers are largely optimistic—mainly due to their greater confidence in the incoming Trump administration’s proposed economic and tax policies.

• Some 42% of consumers with incomes over $100,000 say they are spending fairly or very freely, according to an Attest survey.
• At the same time, the proportion who report spending cautiously (37%) has fallen 7 percentage points YoY.

That’s good news for retailers like Richemont, lululemon, and Nordstrom that target more affluent customers—but it also emphasizes the widening chasm between high-end players and everyone else.

This article is part of EMARKETER’s client-only subscription Briefings—daily newsletters authored by industry analysts who are experts in marketing, advertising, media, and tech trends. To help you finish 2024 strong, and start 2025 off on the right foot, articles like this one—delivering the latest news and insights—are completely free through January 31, 2025. If you want to learn how to get insights like these delivered to your inbox every day, and get access to our data-driven forecasts, reports, and industry benchmarks, schedule a demo with our sales team.