Retailers Face A Halloween Crunch As Consumers Spend Less

A predicted decline in Halloween spending is the latest setback for heavily indebted retailers struggling with rising overheads and the trend of consumers opting for cheaper products, Reshmi Basu reported for Bloomberg News.

Sales of greeting cards and costumes are likely to experience the greatest decline.

US spending for the holiday is expected to drop by 5% to $11.6 billion this year, according to the National Retail Federation (NRF).

Sales of greeting cards and costumes are likely to experience the greatest decline, affecting merchants who rely on seasonal splurges during what has already been a challenging year for the industry.

Households at the lower end of the income scale are struggling as unemployment has edged higher this year and underlying inflation remains elevated. Retailer Michaels Cos. noted in a recent earnings call that households earning less than $100,000 are cutting back, resulting in smaller purchase sizes.

“This year has been a perfect storm for retailers of all kinds,” said Erica Weisgerber, a partner at law firm Debevoise & Plimpton LLP.

“Inflation, high operational costs, and reduced consumer spending have been especially challenging for brick-and-mortar retailers, while online retailers face intense competition from e-commerce giants like Amazon.”

Many of the struggling firms, including Michaels and At Home Group Inc., are owned by private equity managers after buyouts during the pandemic proved ill-timed as interest rates rose and inflation squeezed household budgets.

Home, clothing, and hobby retailers dominate the list of distressed retailers because their high debt levels limit their ability to compete with better-capitalized competitors, according to Moody’s Ratings.