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    Black Friday Shoppers Worry About Economy as Retailers Push Sales

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    Black Friday deals returned, drawing shoppers back into stores, but inflation worries left many companies unsure what the holiday shopping season would look like.After two years of pandemic improvisation and in-store restrictions, this year’s Black Friday felt like a return to normalcy.Shoppers who ventured out on Friday, and even those who didn’t, saw a deluge of deals that had been missing the past couple of years. Many retailers pushed lower prices both in stores and online in response to Americans having recently shown they were more than willing to wait for a discount before making a purchase.“I think we’re going back to what we had before the pandemic with what we’re offering on Black Friday,” said Stephen Lebovitz, the chief executive officer of CBL Properties, which owns about 95 properties, including shopping centers and malls across the United States. “There are changes, but it’s going to feel a lot more like 2019 Black Friday than anything in the interim years.”Still, near-record inflation and dwindling savings kept some shoppers home and left retailers unsure what the season would ultimately bring.Many well-off consumers remain stable financially and appear ready to spend, but others face far more economic uncertainty. That isn’t expected to change anytime soon. Analysts, economists and retail executives are monitoring a potential economic slowdown in the first few months of 2023 that could worsen consumers’ wariness.That makes the holiday season — always the most important time for retailers — even more crucial this year.As the day began at Macy’s Herald Square, the department store’s flagship location in Manhattan, there was a steady flow of customers, and store employees clapped as people entered. Some said they were excited to shop but had concerns over prices.Shoppers who entered the flagship Macy’s location in Manhattan were greeted with applause from store employees.Mathias Wasik for The New York TimesTammy Freeman, 59, from New York, stood at the front of the line near the store’s main entrance, ready for her annual Black Friday excursion. She said that she was eager to buy various items, including a case for her daughter’s laptop, but noted that inflation was changing her general approach to spending.“I have to budget more,” she said. “I have to catch the sales more.”Eighty percent of holiday shoppers are likely to make a purchase from Black Friday through Cyber Monday, according to a survey from Bankrate. People shopping online pulled out their wallets on Thanksgiving Day as well, with sales up 2.9 percent compared with a year earlier, according to Adobe Analytics, which tracks online sales. Adobe estimated that online spending for the holiday season would increase 2.5 percent from last year. It said it had calculated that online prices were down 0.7 percent in October compared with last year, largely because of early holiday deals, though they rose 0.3 percent from September.On Friday, bargain-hunting shoppers definitely seemed to have the power. Stores posted signs advertising 50 to 60 percent off items. At a Target in Springfield, Ill., shoppers walked around with 65-inch televisions in shopping carts, and some wore matching T-shirts that said “Gather, gobble and shop.”In San Francisco’s Union Square, it was relatively quiet. By 7 a.m., when the line outside Macy’s had dissipated, it felt “more or less like a normal day,” said Clifford Cheng, a retail associate at the store.At a nearby Neiman Marcus, only about a dozen shoppers waited outside ahead of the store’s 9 a.m. opening. Natali Carrasco, 20, and Batechaa Steele, 20, were first-time Black Friday shoppers at the luxury department store.“We always come and shop here, but we always buy full price, so we wanted to see the sales,” Ms. Carrasco said.Shoppers have already cut back on some discretionary purchases, leaving many retailers with excess inventory.Nic Antaya for The New York TimesEven before the start of the season, some shoppers were already cutting back on discretionary purchases, leaving retailers with an unusually high level of inventory. They want to unload as much of that as possible before the start of the new year. “The more sales merchandise that they move through now the better,” said Kristen Gall, president of the online platform Rakuten, which offers cash-back deals. “Because if you get caught holding a lot of inventory in January and February and consumers pull back because things feel significantly more recessionary, that’s where the worry comes in for retailers.”Despite the economic unease shoppers have expressed, retailers said they were optimistic.“Even in really tough years Black Friday is a very strong day for us,” Jeff Gennette, Macy’s chief executive, said in an interview.And there were promising signs. Forty percent of consumers said they planned to shop in malls this holiday season, higher than the 35 percent of consumers who did during the 2019 Christmas season, before pandemic lockdowns, according to a survey from the consultancy KPMG. Last year, the number of shoppers who said they planned to venture inside a mall was 31 percent.Americans were also still purchasing gifts online. Adobe said online sales for Black Friday were expected to total $9 billion, up 1 percent year-over-year..Retailers took different approaches to entice shoppers to spend. Macy’s did not bring back the opening doorbuster deals — which went away during the pandemic amid social distancing guidelines — and instead offered sales throughout the day. It also continued the pandemic-era tradition of having Santa take photos with children while seated behind a desk, a sign that Covid concerns remain.J.C. Penney leaned back into doorbusters for the first time since 2019 because it said it wanted to motivate discount-focused shoppers to get out to stores. For its 5 a.m. doorbusters, the department store chain deliberately kept “pre-inflation pricing” on key items like Instant Pots, bath towels and boots. Signs in stores trumpeted 65 percent off discounts. Shoppers lined up outside the J.C. Penney in El Paso, Texas, before it opened at 5 a.m, on Friday.Justin Hamel for The New York Times“We think we’ll have a big volume of customers at the store, and to bring them in we know that value is very important to the consumer right now,” said Marc Rosen, J.C. Penney’s chief executive.On its website, the mall owner CBL highlighted the discounts that stores like H&M and the children’s apparel retailer Carter’s were offering. Other retailers employed a similar strategy in the days leading up to Black Friday. J. Crew on Monday advertised 50 percent off purchases. On Gap’s website, a large black banner scrolled atop the page saying “HPY BLK FRI” and highlighting 50 percent off deals with an additional 10 percent markdown.There are risks for retailers, however, in relying more heavily on deals. The practice erodes profit margins that buoyed them during the pandemic, when many Americans spent plenty on all sorts of goods and retailers did not feel the need to entice them with too many deals. There are also worries that shoppers will become so accustomed to sales that they will only buy when promised a lower price.“Consumers understanding that they can wait out discounts, coupled with retailers’ drive to move goods, likely means that this Black Friday will be more important than Black Friday has been in a long time,” Simeon Siegel, a managing director at BMO Capital Markets, said. “Whether that’s good for the brands, whether that’s good for the consumer — that’s a separate conversation.”Retailers are also competing more with entertainment options, like concerts and dining out at restaurants, than they have in the past couple of years. Consumers are expected to allocate a larger share of their holiday spending on experiences this year compared with last. The average amount that middle-income Americans, who make between $50,000 to $99,000 annually, spend on experiences is expected to increase 15 percent this year, according to a survey released in October from Deloitte.Of course, not every retailer places so much importance on Black Friday.The outdoor equipment retailer REI has remained closed on the day since 2015. This year, the company said it had decided to permanently give its workers a paid day off on Black Friday, encouraging them to spend time outside instead.But that was the exception. Even while the total sales for Black Friday were still being tallied, many retailers were already looking to further entice shoppers by rolling out advertisements for more discounts on Monday.“We believe that the consumer is quite aware of the fact that there’s plenty of inventory out there,” Richard Hayne, the chief executive of Urban Outfitters, said on a call with analysts this month. “And what they’re doing is waiting for big promotional events that normally occur on Black Friday and Cyber Monday in order to make their purchases.”Retailers may need to offer more deals, he said, but “I don’t believe it will be a total blood bath.”Isabella Simonetti More

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    A Holiday Season Divided by Inflation and Economic Struggles

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    Even if policymakers achieve a gentle economic slowdown, it won’t be smooth for everyone.Langham Hotel in Boston has plush suites and conference rooms. Across town, in Dorchester, people line up for Thanksgiving turkeys at Catholic Charities.November has been busier than expected at the Langham Hotel in Boston as luxury travelers book rooms in plush suites and hold meetings in gilded conference rooms. The $135-per-adult Thanksgiving brunch at its in-house restaurant sold out weeks ago.Across town, in Dorchester, demand has been booming for a different kind of food service. Catholic Charities is seeing so many families at its free pantry that Beth Chambers, vice president of basic needs at Catholic Charities Boston, has had to close early some days and tell patrons to come back first thing in the morning. On the frigid Saturday morning before Thanksgiving, patrons waiting for free turkeys began to line the street at 4:30 a.m. — more than four hours before the pantry opened.The contrast illustrates a divide that is rippling through America’s topsy-turvy economy nearly three years into the pandemic. Many well-off consumers are still flush with savings and faring well financially, bolstering luxury brands and keeping some high-end retailers and travel companies optimistic about the holiday season. At the same time, America’s poor are running low on cash buffers, struggling to keep up with rising prices and facing climbing borrowing costs if they use credit cards or loans to make ends meet.The situation underlines a grim reality of the pandemic era. The Federal Reserve is raising interest rates to make borrowing more expensive and temper demand, hoping to cool the economy and bring the fastest inflation in decades back under control. Central bankers are trying to manage that without a recession that leaves families out of work. But the adjustment period is already a painful one for many Americans — evidence that even if the central bank can pull off a so-called “soft landing,” it won’t feel benign to everyone.“A lot of these households are moving toward the greater fragility that was the norm before the pandemic,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.Many working-class households fared well in 2020 and 2021. Though they lost jobs rapidly at the outset of the pandemic, hiring rebounded swiftly, wage growth has been strong, and repeated government relief checks helped families amass savings.But after 18 months of rapid price inflation — some of which was driven by stimulus-fueled demand — the poor are depleting those cushions. American families were still sitting on about $1.7 trillion in excess savings — extra savings accumulated during the pandemic — by the middle of this year, based on Fed estimates, but about $1.35 trillion of it was held by the top half of earners and just $350 billion in the bottom half.At the same time, prices climbed 7.7 percent in the year through October, far faster than the roughly 2 percent pace that was normal before the pandemic. As savings have run down and necessities like car repair, food and housing become sharply more expensive, many people in lower-income neighborhoods have begun turning to credit cards to sustain their spending. Balances for that group are now above 2019 levels, New York Fed research shows. Some are struggling to keep up at all.“With the cost of food, the explosive cost of eggs, people are having to come to us more,” said Ms. Chambers of Catholic Charities, explaining that other rising prices, including rent, are intensifying the struggle. The location planned to give out 1,000 turkeys and 600 gift cards for turkeys, at its holiday distribution, along with bags of canned creamed corn, cranberry sauce and other Thanksgiving fare.Tina Obadiaru, 42, was among those who lined up to get a turkey on Saturday. A mother of seven, she works full time caring for residents at a group home, but it isn’t enough to make ends meet for her and her family, especially after her Dorchester rent jumped last month to $2,500 from $2,000.“It is going to be really difficult,” she said.The disproportionate burden inflation places on the poor is one reason Fed officials are scrambling to quickly bring price increases back under control. Central bankers have lifted interest rates from near zero earlier this year to nearly 4 percent, and have signaled that there are more to come.But the process of lowering inflation is also likely to hurt for lower-income people. Fed policies work partly by making it expensive to borrow to sustain consumption, which causes demand to decline and eventually forces sellers to charge less. Rate increases also slow down the labor market, cooling wage growth and possibly even costing jobs.Catholic Charities has seen a surge in demand for food.November has been busier than expected at the Langham Hotel.That means that the solid labor market that has buoyed the working class through this challenging time — one that has particularly pushed up wages in lower-paying jobs, including leisure and hospitality, and transportation — could soon crack. In fact, Fed officials are watching for a slowdown in spending and pay gains as a sign that their policies are working.“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Jerome H. Powell, the Fed chair, said at a key Fed conference in August. “These are the unfortunate costs of reducing inflation.”Central bankers believe that a measure of pain today is better than what would happen if inflation were allowed to continue unchecked. If people and businesses begin to expect rapid price increases and act accordingly — asking for big raises, instituting frequent and large price increases — inflation could become entrenched in the economy. It would then take a more punishing policy response to bring it to heel, one that could push unemployment even higher.But evidence accumulating across the economy underscores that the slowdown the Fed has been engineering, however necessary, is likely to feel different across different income groups.Consumer spending overall has so far been resilient to the Fed’s rate moves. Retail sales data moderated notably early in the year, but have recently picked back up. Personal consumption expenditures aren’t expanding at a breakneck pace, but they continue to grow.Yet underneath those aggregate numbers, a nascent shift appears to be underway — one that highlights the growing divide in economic comfort between the rich and the poor. Credit card data from Bank of America suggest that high- and middle-income households have replaced lower-income households in driving consumption growth in recent months. Poorer shoppers contributed one-fifth of the growth in discretionary spending in October, compared with around two-fifths a year earlier.“This is likely due to lower-income groups being the most negatively impacted by surging prices — they have also seen the biggest drawdown of bank savings,” economists at the Bank of America Institute wrote in a Nov. 10 note.Even if the poor feel the squeeze of elevated prices and higher interest rates and pull back, the economists noted that continued economic health among richer consumers could keep demand strong in areas where wealthier people tend to spend their money, including services like travel and hotels.At the Langham, a newly renovated hotel in a century-old building that originally served as the Federal Reserve Bank of Boston, there is little to suggest an impending slowdown in spending. In “The Fed,” the hotel bar named in a nod to the building’s heritage, bartenders are busy every weeknight slinging cocktails with names like “Trust Fund Baby” and “Apple Butter Me Up” (both $16). When guests come back from shopping on nearby Newbury Street, the hotel’s managing director, Michele Grosso, said, their arms are full of bags. He sees the fact that the Thanksgiving brunch sold out so fast as emblematic of continued demand.“If people were pulling back, we’d still be promoting,” he said of the three-course, family-style meal. “Instead, we’ve got a waiting list.”The consumption divide playing out in Boston is also clear at a national level, echoing through corporate earnings calls. American Express added customers for platinum and gold cards at a record clip in the United States last quarter, for instance, as it reported “great demand” for premium, fee-based products.The $135-per-adult Thanksgiving Brunch at the Langham Hotel sold out weeks ago.Food to be distributed at Catholic Charities, which has been giving out Turkeys, cranberry sauce and other Thanksgiving fare.“As we sit here today, we see no changes in the spending behaviors of our customers,” Stephen J. Squeri, the company’s chief executive, told investors during an earnings call last month.Companies that serve more low-income consumers, however, are reporting a marked pullback.“Many consumers this year have relied on borrowing or dipping into their savings to manage their weekly budgets,” Brian Cornell, the chief executive of Target, said in an earnings call on Nov. 16. “But for many consumers, those options are starting to run out. As a result, our guests are exhibiting increasing price sensitivity, becoming more focused on and responsive to promotions and more hesitant to purchase at full price.”The split makes it hard to guess what will happen next with spending and inflation. Some economists think the return of price sensitivity among lower-income consumers will be enough to help overall costs moderate, paving the way for a notable slowdown in 2023.“You get more promotional activity, and companies starting to compete for market share,” said Julia Coronado, founder of MacroPolicy Perspectives.But others warn that, even if the very poor are struggling, it may not be sufficient to bring spending and prices down meaningfully.Many families paid off their credit card balances during the pandemic, and that is now reversing, despite high credit card rates. The borrowing could help some households sustain their consumption for a while, especially paired with strong employment gains and recently fallen gas prices, said Neil Dutta, head of U.S. economics at Renaissance Macro.As the world waits to see whether the Fed can slow down the economy enough to control inflation without forcing the country into an outright recession, those coming to Catholic Charities in Boston illustrate why the stakes are so high. Though many have jobs, they have been buffeted by months of rapid price increases and now face an uncertain future.“Before the pandemic, we thought in cases,” Ms. Chambers said, referencing how much food is needed to meet local need. “Now we think only in pallets.” More

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    Billions of Dollars at Stake in a Puzzling Holiday Shopping Season

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    It promises to be unpredictable, with retailers and consumers still figuring out how much will be spent and on what kinds of goods.No one quite knows what to make of this year’s holiday shopping season. But billions of dollars are riding on it.After two pandemic holiday seasons messed with doorbusters, party plans and supply chains, retailers were hoping that this year would be a return to sanity. But just as it started to appear that families and stores could pull out their old playbooks, along came near-record inflation and the war in Ukraine, only increasing general unease about the state of the world.Some things are looking up. The pandemic has receded, supply chains generally stabilized, and the labor market is strong.But in March, the Federal Reserve started raising interest rates to slow down inflation, just as retail executives were making plans for which toys, wreaths and fuzzy socks shoppers would buy come winter. To try to ensure a robust shopping season, retailers leaned in early and often. Christmas trees showed up at Costco in August. Amazon threw what amounted to a second Prime Day in October. And it seems every day has brought ads for Black Friday deals, like the ones that Target offered throughout October.Still, shoppers seem confused. Should they buy now or later? Purchase for a lot of people or put a priority on a few? Give items or shared experiences? Trust online deliveries or go with local shops?“The truth is, we don’t know whether consumers will spend more or less on gift giving or whether they’ll do more shopping online or in the mall,” Etsy’s chief executive, Josh Silverman, told investors recently.That has left companies making predictions for the all-important retail season that amount to a shrug.“We’re not quite sure how strong holiday spending will be versus last year,” Brian Olsavsky, Amazon’s finance chief, told investors in October, “and we’re ready for a variety of outcomes.”Or, as Peter Boneparth, the chair of Kohl’s board, told analysts this month, “I think everybody believes that Christmas will come, but I don’t think anybody out there knows for sure exactly what’s going to happen.”Feeling inflation’s squeezeMathias Wasik for The New York TimesInflation is on everyone’s mind. Higher prices on all sorts of items have made people rethink what they’re buying and whom they’re buying for. While inflation is moderating slightly, it’s at the highest levels since Indiana Jones was bullwhipping raiders of the Lost Ark at the mall cineplex.More on Big TechMicrosoft: The company’s $69 billion deal for Activision Blizzard, which rests on winning the approval by 16 governments, has become a test for whether tech giants can buy companies amid a backlash.Apple: Apple’s largest iPhone factory, in the city of Zhengzhou, China, is dealing with a shortage of workers. Now, that plant is getting help from an unlikely source: the Chinese government.Amazon: The company appears set to lay off approximately 10,000 people in corporate and technology jobs, in what would be the largest cuts in the company’s history.Meta: The parent of Facebook said it was laying off more than 11,000 people, or about 13 percent of its work forceThe National Retail Federation predicts that holiday sales in November and December will increase 6 to 7 percent from last year, but that’s below the rate of inflation.“Folks are really looking for deals this year,” said Melissa Burdick, who spent a decade at Amazon and founded Pacvue, which helps big brands sell online. “They’re shifting what they’re buying to favor lower-priced brands and more necessary items.” She summed up the sentiment as: “I used to want Bose headphones. Now I will buy chips on sale on Amazon.”Cristian Tinoco, 19, who works 45 hours a week at a gym in Seattle and attends community college, said his family would focus on spending Christmas together after a rocky year.“Gas has especially gone up. I probably spend about $400 a paycheck on gas because I commute 35 minutes each way, each day. I have three siblings, so my parents have four kids at home and spend more than $1,000 a month on groceries. I help sometimes pay for food with my paycheck.“My student loan application got messed up, so I’ve been paying for college out of pocket. I don’t want to drop out. I may finally be able to start saving. I want to buy a truck — it just feels like me.”The experience is the thingPeople spent two pandemic years buying stuff. With stimulus checks, rising wages and nowhere to go, last year’s holiday season generated the biggest annual growth in retail spending on record — 14.1 percent.This year, Covid-19 travel restrictions have eased, and masking mandates are virtually gone. Retailers are bracing to lose out on spending as more people go on trips, attend concerts and eat out.The Transportation Security Administration said screenings were up 33 percent from last year, and concert bookings are up 51 percent, according to Eventbrite.“They were reminded that life is very short, and coming out of this pandemic they want to experience life again,” Mike Daher, an executive at the consultancy Deloitte, said.Mary Anna Ball, 25, a ballerina and research analyst in West Virginia, usually starts squirreling away Christmas gifts in July but this year wants to give gifts that will help her family experience the world.“I love sweaters and little kitschy things like that, but I know not everyone is that way, and you’ll kind of remember the experience more than when you’re going through your clothes of, ‘How did I get this sweater?’ If you give an experience, that’s something you’ll remember a bit longer, or maybe it’ll introduce you to a new hobby or something like that.“I have two younger brothers. Some people get siblings tattoos. I refuse to do that. But they’ve said it would be fun to go skydiving one day. I thought, I can get them a voucher and, whenever they can, they can just go down and skydive or something.”Christmas came early in many storesMathias Wasik for The New York TimesGetting what you want this year shouldn’t be a big issue. Remembering last year, when popular items were stuck at ports or somewhere in the Pacific Ocean, brands ramped up production, and retailers ordered more products. They did this earlier than usual to make sure items arrived on time, but the supply chain improved. When orders arrived earlier than expected, retailers piled items in warehouses that in some cases were already stuffed with merchandise ordered in 2021.That, combined with uncertain consumer demand, left retailers with record-high inventories, according to data from the Census Bureau.That’s leading to more deals and a hodgepodge of goods on store floors, no matter the season. In other words, Christmas came early to stores.Mike Campese, a guitarist and instructor in Las Vegas, knew this year was going to be strange when he saw holiday merchandise unusually early.“The other day, I was in Costco, and as soon as you walk in, the very first aisle is the Christmas stuff. It is still September! Oh, my God.“It is the earliest I have seen it. Usually the day after Halloween it’s like the malls are playing Christmas tunes and the decorations are up. Some people go shopping in September. I can’t do that. I am not in the spirit yet.”Waiting on deals, even for everyday itemsAmazon tried its best to hype an early holiday sale at the start of October. Some of the top-selling products in the United States — like Crest Whitestrips and protein powder — weren’t exactly typical presents.“No one is buying gifts for Christmas,” said Jason Murray, an Amazon veteran whose company, Shipium, advises online retailers. “They are buying for themselves.”It doesn’t matter much to retailers, who used the early holiday sales to try to offload products before most shoppers had even picked out their Halloween costumes. But it signaled that shoppers are motivated by deals, no matter what they’re for. After two years of limited discounts, shoppers are showing they are willing to hold out for a bargain.Brands are getting on board. “We made too many,” the bike maker Specialized said on its website, telling customers that they can “save BIG.”Rakuten, an online platform that offers deals and shopper rewards, said retailer participation in Black Friday and Cyber Monday promotions was the “biggest in the last three years.”Natalie Rodriguez, 47, who works for the Indiana Department of Revenue, said the products on sale weren’t what she wanted to give for Christmas.“I am really cognizant of those deals that are coming up right now. I think it is a grab to see who gets my money first. Am I taking advantage of it because I perceive it was a deal?“On the Amazon sale, I had 150 things in my cart and saved for later, but I didn’t see anything that is comparable to what I would think is a Black Friday deal. When I was a kid, Black Friday was superlow-cost, like 80 or 90 percent off. Most of what I saw was 30 and 40 percent on some items. It’s like, ‘Nah, I will just pass,’ especially if it is not an essential item. Crest Whitestrips were a great deal, but I don’t need them right now.“All I got was a $50 gift card with a $10 bonus on it.”On-time arrival, finallyFor years, largely spurred on by Amazon, consumers got used to fast shipping — often in two days or less. The pandemic upended that. Driver and inventory shortages meant people had to plan ahead.This year, industry experts do not expect another Shipageddon. There are more than enough delivery and warehouse workers to meet demand. Shippers should be able to deliver 110 million packages a day, almost 20 million more than shoppers are expected to order, according to ShipMatrix, a consultancy.“Because of experiences of what has gone on with global supply chains in the last few years, folks are stretching the holiday season over a longer period,” said Jamil Ghani, the vice president of Amazon Prime.Miranda Rosas, 21, a student at the University of California, Merced, was nervous about late-arriving Christmas gifts, so she started ordering last month.“Shipping last year was so awful, and a lot of items that I ordered a little bit last minute came in time, thankfully, but it took a long time. I tried to start a little sooner.“I really thought that it was going to take a couple weeks or a whole week and then it would ship and then it would take another two weeks to come. Now, a lot of my stuff it’s been like, ‘Oh! Already?’”Luxury is its own thingMathias Wasik for The New York TimesThe vibes are good for people with money to spare.More than three-quarters of luxury shoppers say they plan to spend the same as or more than last year, according to a survey from Saks. Twice as many as last year said they planned on dressing up in formal attire for the holidays, and 40 percent wanted to “self-gift” shoes. Luxury goods companies are giving signals that they’re confident about the U.S. market. This month, Estee Lauder agreed to buy Tom Ford for $2.8 billion, widening its reach into fashion apparel.“Customers are going back to a social life,” said Geoffroy van Raemdonck, chief executive at Neiman Marcus, whose top customers spend an average of $25,000 a year with the brand. “This is one of the first holidays that they feel more comfortable sharing it with their loved ones. I think that there’s a lot of good things coming with the holiday.”Sabah Essa, 49, a style adviser at Neiman Marcus in Atlanta, has been working with her clients, who include doctors, housewives, reality-TV stars and young professionals, to build their holiday wish lists.“Mostly everyone wants a big expensive piece compared to last year. For example, someone maybe got a Prada bag last Christmas, and now they’re upgrading it to high-end jewelry.“They want to find an outfit for going out to dinner or a party or birthday or to grab a gift for another friend. Everybody is just really happy to go out, and they can go without a mask.“A lot of them are also traveling. They want their suitcase to be all new stuff.“One client wants to give his wife 30 different gifts for her turning 30. He wants to have that plus Christmas because her birthday falls right around Christmas. The gifts are all different ranges, from stocking stuffers to high-end jewelry to Chanel bags to shoes — a lot of shoes, from sneakers to heels to boots.“It helps that we offer our clients a glass of champagne when they come in to make it easy for them to shop. Or if they want a cup of tea or coffee. It’s more fun than the years in the past now.”Interviews have been lightly edited for clarity. More

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    As the Fed Raises Rates, Worries Grow About Corporate Bonds

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    Executives, analysts and bond traders are all wondering if corporate finance is about to unravel as interest rates rise.As the Federal Reserve raises interest rates in an effort to tame inflation, the corporate bond market, which lends money to many companies, has been hammered particularly hard.The steep rise in interest rates has caused bond values to tumble: From October 2021 to October 2022, an index that tracks investment-grade corporate bonds is down by roughly 20 percent. By some measures, overall bond market losses have been worse than at any time since 1926.Even the price of bonds issued by the highest-rated corporations have cratered this year.The ICE BofA US Corporate Index, which tracks the performance of U.S. dollar denominated investment grade rated U.S. corporate debt, has severely declined.

    Source: Federal Reserve Bank of St. LouisBy The New York TimesThe yield on bonds issued by solid businesses is now about 6 percent, about twice as much as it was a year ago. That number indicates how high of an interest rate rock-solid corporations would have to pay to borrow more money right now; rates are even higher for smaller businesses or those that investors consider risky.Corporate bankruptcies and defaults remain low by historical standards, but a growing number of companies are struggling financially. Businesses in industries like retail, manufacturing and real estate are especially vulnerable because their sales are weak or falling. In many cases, their customers have also been hurt by higher interest rates because the higher borrowing costs have effectively raised the costs of big-tickets items like homes and cars.Until recently, for example, Carvana was a fast growing used car retailer with a soaring stock. The number of cars the company sold fell 8 percent in the third quarter, and its spending on interest payments tripled compared with the same period a year earlier. The interest rate on a big chunk of its debt issued this year that matures in 2030 is 10.25 percent. Its bonds are trading at less than 50 cents to the dollar, suggesting that investors would require Carvana to pay an interest rate of nearly 30 percent if it were to borrow more money for the same amount of time. The company’s stock is down more than 90 percent over the last year.“There’s certainly a lot of headwinds,” Ernest Garcia III, Carvana’s chief executive, said on a conference call with analysts last week. “Recently, we’ve seen car prices depreciate to the tune of give or take 10 percent so far this year, but we’ve also seen interest rates shoot up very rapidly and I think that overall has harmed affordability,” he added, even as he expressed optimism about the company’s ability to weather the financial storm.Carvana, Co. has paid more in interest payments in the last quarter compared to last year and sold fewer cars.Joe Raedle/Getty ImagesBefore rates jumped, companies borrowed a ton of money last year, with lower-rated firms selling more new bonds in 2021 than in any other year. But that flow has turned into a trickle as interest rates have risen and investors have grown more discerning about whom they lend money to. Banks are still making more commercial and industrial loans, but they are also becoming more discerning and are charging higher interest rates.Most investors, executives and economists expect a recession or anemic growth next year, which could make doing business, borrowing money and paying off loans even more difficult.What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

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    Amid Inflation, Retailers Brace for Strapped Holiday Shoppers

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    Retailers have navigated pandemic closures and supply chain snarls in recent years. But dealing with the fallout from inflation could be an even tougher test.In 2020, it was pandemic closures and social distancing. Last year, it was the supply chain. Now, the problem is demand.For retailers, that may make this holiday season their biggest test yet.The holidays are the most important time of the year for retail. November and December can account for up to a quarter of the annual sales of department stores and specialty retailers. Companies place orders for seasonal and holiday merchandise months in advance so that they have enough stock on hand. The primacy of the holiday season has pretty much held steady, even during the turbulence of the pandemic. Whether through curbside pickup operations or a pivot to more expensive air deliveries during last season’s crunch, retailers still benefited from people ready to spend on all manner of products.Now, as Americans head into the season when they’re prodded to spend with abandon on holiday gifts, they aren’t showing the same willingness to do so.“You’ve had consumers that have had to weather a lot,” said Vivek Pandya, a lead analyst at Adobe Digital Insights, pointing to higher prices for gas, groceries and everyday services that have defied the Federal Reserve’s efforts to control inflation.Overall consumer demand for everyday goods and services remains robust and prices continue to increase at a faster-than-expected pace, but nearly 60 percent of U.S. shoppers say finances are factoring into their holiday shopping decisions, according to a survey by Sensormatic Solutions released this month. That’s up from 14 percent last year. One in five holiday shoppers will spend less this season because of a changed economic situation, a recent survey from the NPD Group, a marketing research firm, found.This holiday season, retailers “have to think about and pivot a little bit more to win the consumer compared to only thinking about the profit margin from the purchase,” Mr. Pandya said. “Now, with demand being weaker, they really have to go out of their way to advertise to consumers and get consumers with the highest likelihood to spend.”But discounts eat into retailers’ profit margins, and they have been able to employ that strategy only sparingly in recent years. During last year’s holiday season, in particular, retailers recorded bigger margins thanks to supply chain logjams. Inventory was low, and shoppers were clamoring to get their hands on products. The result: fewer discounts.“A lot of that is going to reverse, if not more than reverse, across department stores and specialty apparel,” said David Silverman, a senior director at Fitch Ratings. “Consumers are less compelled to buy, and they’re going to need the call to action.”A difficult holiday season for retailers could lead to restructurings and layoffs in 2023.John Taggart for The New York TimesIt’s a very difficult time for any company that sells things. The Fed has spent this year trying to combat near-record inflation by raising interest rates to tamp down consumer spending. Retailers have too much merchandise that shoppers no longer want. Consumer spending on durable goods has been easing over the past couple of months, according to data from the St. Louis Fed. Many retailers have recently revised their full-year financial outlooks, halted hiring and closed stores.Amazon is freezing corporate hiring for its retail business for the rest of the year. Peloton is laying off about 12 percent of its work force in its fourth round of job cuts this year. FedEx is halting hiring and closing stores as demand falls. Walmart plans to hire fewer seasonal workers this year. The Gap is cutting 500 corporate positions.Inflation F.A.Q.Card 1 of 5What is inflation? More