Apparel, home improvement lift retail to $850B in holiday sales

Dive Brief:

Holiday retail sales grew 5.1% to more than $850 billion, the strongest in six years, fueled especially by apparel and home improvement sales, according to the most recent Mastercard SpendingPulse report, which was emailed to Retail Dive. Apparel sales grew 7.9% from 2017, the best growth since 2010, and home improvement spending rose 9%, continuing a strength sparked months earlier. Furniture and home goods sales alone rose 2.3%.
Though a smaller piece of the pie, online shopping grew even more year over year — by 19.1%, according to the report, which tracks spending across payment types. The findings are based on aggregate sales activity across the U.S. in the Mastercard payments network, plus survey-based estimates for other forms, including cash and check.
Other segments of retail had more meager results. Department store sales fell 1.3% from 2017, a decline that follows two years with growth of less than 2%, according to the report — although the sector's digital sales rose 10.2%. Electronics and appliance sales fell 0.7%.

Dive Insight:

Retailers did themselves a lot of favors this season, with many making their stores into appealing holiday destinations and leveraging those locations for last-minute pickup. All that allowed them to take advantage of the spending spirit evident among consumers this year.

"From shopping aisles to online carts, consumer confidence translated into holiday cheer for retail," Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Incorporated, said in a statement. "By combining the right inventory with the right mix of online versus in-store, many retailers were able to give consumers what they wanted via the right shopping channels."

The sales surges didn't come easily all the days, though. Weather — including cold on Black Friday on the East Coast, rain on the week of Dec. 15-16 on both costs and storms on the Friday before Christmas — interfered with shopping trips and fulfillment, according to the report.

The season puts retailers on firm footing as they enter a new year littered with questions about how robust consumer confidence and the economy can remain and about the toll that macro headwinds like tariffs and rising interest rates might take on both. Wells Fargo analysts, in comments emailed to Retail Dive, noted "weaker traffic and more elevated promotional posturing through [December] — an ominous end to an otherwise successful year" and warned of challenges coming down the pike.

Those include weakness in Europe, uncertainty in China, increased pressure from currency fluctuations, an "underperformance" in e-commerce, margin pressures from freight, wage costs and capital pressures from leases, along with tough comparisons, the Wells Fargo team led by Ike Boruchow said in their report.