Global 2024 Holiday Retail Outlook: For Some Retailers, 'Tis the Season to be Jolly

Around the world, the holiday season - the months of November and December - is marked by major shopping events, including U.S. Thanksgiving, Black Friday, Christmas, and New Year, and is pivotal for most retailers. This commentary covers our expectations of consumer behaviour this holiday season, and the expected impact on the credit risk profiles of issuers in the broader global retail sector.

Key Highlights:
-- This holiday season, consumer purchasing power remains stretched and consumer sentiment is somewhat subdued.
-- We expect consumers to continue to prefer private-label and value-based products, search widely for promotional discounts, and remain cautious with their overall spending, particularly on the more discretionary product categories.
-- These dynamics could pressure the credit risk profiles of some retailers in our portfolio, albeit to varying degrees, depending on their value proposition and the discretionary/nondiscretionary nature of their offerings.

"Given the current macroeconomic environment and consumer sentiment, we anticipate that the expected changes in consumer behaviour will increasingly favour grocers and discount retailers and could have a varied effect on general retailers depending on where they are on the discretionary to non-discretionary spectrum and their product assortment across different pricing tiers," said Aarti Magan, Vice President, Diversified Industries. "On the other hand, the operating performance and free cash flow of some more niche, discretionary retailers could be pressured."