Is America headed for recession? See what rich Americans do on Black Friday – Gudstory

In the three months before the all-important holiday shopping season, sales at a group of retailers that cater to the upper middle class — including Apple, Coach and Nordstrom — fell by a two-year low, according to an exclusive analysis by Bloomberg Second. The biggest decline was observed. Measure data. The problem has hit even the top-performing malls in wealthier areas, while overall retail sales figures remain high.

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Despite record interest rates and rising inflation, the upper middle class “is spending more than expected,” says Kayla Brun, senior economist at survey research firm Morning Consult. Household incomes of $100,000 are starting to become more frugal, she says.

On Tuesday, Best Buy Co. and Lowe’s Co. cut their forecasts and warned that shoppers were pulling out of big-ticket items like appliances ahead of the holiday season. Kohl’s Corp. reported its seventh consecutive decline in comparable sales, as a partnership with Sephora attracted customers but did not inspire them to spend more money on other items at the department store. Even positive results from some retailers left investors wanting more as shares of Abercrombie & Fitch Co. and American Eagle Outfitters Inc. fell.

Affluent shoppers often have a larger impact on changes in consumer spending because they have money to spend when times are good but pull money back faster than the wealthy when they feel pressured. So the impact on brands, retailers and shopping malls that cater to wealthy Americans portends potential weakness for the US economy.

As a proxy for high-income spending, Bloomberg created a Prosperity Index of 30 large retailers and brands in 10 categories — including clothing, jewelry and electronics — with an average transaction value above their peer group.

With the exception of makeup and skin care vendors Sephora and L’Occitane, all companies in the index surpassed an average of $100 per purchase in October. Some retailers, including Apple ($267) and West Elm ($292), are selling much more than that. Most popular holiday-shopping destinations are there, including Best Buy, Williams-Sonoma.

Retailers and brands in the index have experienced sales declines since January that have deepened recently, according to Bloomberg Second Measure, which tracks anonymized U.S. credit and debit-card transactions. Sales of 70% of companies have declined in the three-month period from August to October. The average change in sales reflected a decline of 14% – the worst performance in two years. Some brands that challenged this trend were Ugg, which Vogue called the “coolest new shoe” earlier this year.

Julie Robinson-Jasper, 54, whose Seattle family makes more than $100,000 a year, is already planning to limit holiday spending. She has set the price of gifts for her two children at $600 – the same as in the previous three years, but with purchasing power significantly reduced after rapid inflation. The family is eating mostly at home to avoid high prices at restaurants and to avoid turning to the resale market for clothes.

“If something happens again, like a layoff or an illness, we don’t want to be caught off guard,” says Robinson-Jasper, who works in a plant nursery.

Foot traffic at shopping malls serving higher-income areas also began to decline for the first time since the pandemic, according to an analysis of Placer.ai mobility data for the top shopping centers in 25 states. In October, 21 of the 25 shopping destinations analyzed – from Birmingham, Alabama to Garden City, New York and Bellevue, Washington – reported declines in foot traffic. Total trips declined 3.3% in the latest three-month period, the worst performance since the start of 2021.

This moderation extends to areas where population has increased after the pandemic. On the outskirts of growing Houston, where household incomes are 20% higher than in Texas overall, Baybrook Mall has seen footfall drop by 660,000 people this year, or about 6%, according to Placer.ai, which tracks mobile-phone Analyzes location data.

“Everyone is in window-shopping behavior right now,” says Bre Clinton, assistant manager of The Body Shop at Baybrook Mall. “They don’t have many bags in their hands.”

Clinton, 25, says holiday shopping is off to a slow start, with inexpensive items like smaller body scrubs selling better than pricier options. To attract shoppers, the store is offering more trial sizes of the lotion, she says.

A spokesman for Brookfield Properties, owner of Baybrook Mall, said retail sales at the shopping center had grown in the 12 months to September and the company was “thrilled” with its performance.

The slowdown at malls and retailers serving the upper middle class stands in contrast to U.S. retail-sales numbers, which have posted year-over-year growth since 2020, when the pandemic shuttered the economy. During the lockdown, high-end buyers started spending money on their homes and new wardrobes. As Covid faded, spending shifted to services and experiences like vacations, restaurants and Taylor Swift concerts.

But years of high inflation and rising interest rates have soured the mood of some consumers. While the job market remains strong, real incomes have declined, with parts of the upper middle class taking a big hit.

According to Census Bureau data, the median income of American households headed by someone with a college degree will fall 4.9% to $118,000 in 2022 — twice the rate of decline for all earners. Only in the last few months have wages adjusted for inflation begun to rise again.

Spending patterns among the upper middle class often reflect how they feel about their wealth, which is strongly linked to the value of their homes. Property prices are falling in many major markets.

Brun says wealthy Americans are worried about their jobs and are choosing to pay off debt after spending money on summer travel.

Already, buyers are pulling out of big-ticket items like washing machines, botox and even teeth straightening. Buying on credit has become more expensive after the Federal Reserve significantly increased interest rates to curb inflation, hurting sales of Harley-Davidson motorcycles and Teslas.

“Customers are sitting on the sidelines,” Harley-Davidson Chief Commercial Officer Adele O’Sullivan told analysts last month. “Just putting this level of discretionary purchases aside in 2023.”

Similarly, Revolve Group, an online fashion apparel retailer with an average order of about $300, warned of trouble earlier this month when co-Chief Executive Officer Mike Karanikolas spoke with analysts.

“Aspirational luxury consumers who were short on cash 18 months ago don’t have the same spending power,” he said.

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Updated: Nov 21, 2023, 08:47 PM IST