• Many retailers struck a cautious tone when they provided their holiday forecasts during third-quarter earnings reports, spelling trouble for the shopping season right as it kicks off.
• Holiday spending growth is expected to slow this year after seeing outsize gains during the Covid-19 pandemic years.
• Companies aren't sure just how much consumers will spend this year in the face of persistent inflation and rising interest rates.

There's a dark cloud hanging over Black Friday.

A slew of retailers have issued tepid, cautious or downright disappointing fourth-quarter outlooks over the past few weeks, casting a pall over the crucial holiday season right as they gear up for the biggest shopping day of the year.

The companies, which include everyone from luxury goods giant Tapestry to big boxer BJ's Wholesale Club, cited a host of dynamics that led them to reduce their outlooks or issue forecasts that came in below expectations. 

Some, such as Best Buy and Nordstrom, cited the uncertain state of the consumer following months of persistent inflation, while others, such as Hanesbrands, said demand is simply drying up for its basic T-shirts, socks and underwear as wholesalers look to keep inventories in check.

Even Dick's Sporting Goods and Abercrombie & Fitch, which both raised their full-year guidance on Tuesday after strong third quarters, managed to underwhelm with their holiday forecasts. 

If there's one theme that captures the commentary, it's caution, and while some retailers may have been overly conservative with their outlooks, the resounding lack of confidence spells trouble for the holiday quarter and raises questions about the overall health of the economy. 

"Consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs," Target CEO Brian Cornell told analysts on a call last week.

"As we look at recent trends across the retail industry, dollar sales are being driven by higher prices with consumers buying fewer units per trip. In fact, overall unit demand across the industry has been down 2% to 4% in recent quarters, and the industry has experienced seven consecutive quarters of declines in discretionary dollars and units," he said.

When asked about the upcoming holiday season, Cornell said it was too soon to weigh in on early sales, saying only that the company was "watching the trends carefully."

Ho-hum growth for holiday spend

The holiday shopping season over the past couple of years has seen outsize growth brought on by the Covid-19 pandemic, which gave consumers stimulus payments and an opportunity to pad their bank accounts while they were stuck at home and unable to travel or dine out. 

In 2020, holiday spend was up 9.1% from the year prior, according to the National Retail Federation. In 2021, spend was up 12.7% year over year, and in 2022, it was up 5.4%.

As 2023 comes to a close, savings accounts dwindle and consumers continue to face inflation and high interest rates, that growth in holiday spend is expected to slow to 3% to 4%, according to the NRF. That's consistent with the slower growth rates seen between 2010 and 2019 in the lead up to the pandemic. 

The expected slowdown has led many retailers to approach the holiday season with more caution than Wall Street anticipated.

On Monday, Bank of America's consumer team found that out of 43 retailers that issued earnings forecasts, 37, or 86%, came in light of Street expectations. 

Take Walmart, for example. The retailer struck a cautious tone with its outlook, which came in below expectations, after it saw consumer spending weaken toward the end of October. Last week, it said it expects adjusted earnings per share of $6.40 to $6.48 for the year, lower than the $6.48 analysts had projected, according to LSEG, formerly known as Refinitiv. 

"Halloween was good overall," Chief Financial Officer John David Rainey said on a call with CNBC. "But in the last couple of weeks of October, there were certainly some trends in the business that made us pause and kind of rethink the health of the consumer."

For some retailers, even good news wasn't cheery enough.

Dick's Sporting Goods raised its forecast Tuesday after posting strong top- and bottom-line beats and said it now expects full-year earnings per share of between $11.45 and $12.05, compared with the $11.27 to $12.39 range that analysts had projected, according to LSEG.

But compared to its strong third-quarter results, the outlook came off as tempered.

The retailer said it was "excited" for the holiday but couched that optimism with executives repeatedly noting they were looking forward to the things "within our control" — a refrain heard four times during the hour-long call. 

"We are very excited about what we have within our control for Q4. Our products are in stock. We've got tremendous gifts … and the teams are pumped to deliver an amazing holiday experience," CEO Lauren Hobart said on a call with analysts. "We're balancing all of that with caution about the macroeconomic environment and the consumer, because we know that consumers are going through a lot right now. So, I think, we've been reasonably cautious in our guidance." 

— CNBC's Melissa Repko contributed to this report.

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