Good morning. Fortune reporter Will Daniel here today, filling in for Sheryl Estrada.
The holiday season is fast approaching, but many Americans are cutting back this year. And for CFOs, that could make for a challenging few months.
A new study of roughly 2,000 consumers’ holiday shopping plans from Morgan Stanley shows 37% of shoppers are planning to keep their holiday budgets roughly the same this year, even after a year’s worth of inflation, while 27% expect to decrease their spending. “This means that retailers will be competing for a budget pool that is similarly sized to last year and will have to offer competitive prices to entice shoppers to choose their products,” Morgan Stanley analysts led by equity strategist Michelle Weaver wrote in a Thursday note to clients.
To their point, some 69% of consumers surveyed said they are waiting to see discounts before they begin holiday shopping—and I mean serious discounts. “Shoppers are looking to see 30% discounts, on average,” Weaver wrote.
For CFOs who were planning to raise prices, it might also be time to rethink your options. Morgan Stanley’s study found that if retailers raise prices, just 14% of consumers would buy the same amount of goods, while 45% said they would buy “a little less” and 34% said they would buy “a lot less.”
“Consumers are sensitive to rising prices,” Weaver wrote of the findings.
The number of Americans who say they will forgo holiday gift buying altogether also rose significantly this year. Some 10% of consumers now say they don’t plan on doing any holiday shopping, up from just 7% in October 2021 and 8% in November of 2022. And when it comes to consumers making under $50,000 a year, a whopping 15% said they don’t plan on doing any holiday shopping this year.
The poor results from the holiday shopping survey is one of the reasons Morgan Stanley analysts have turned bearish on the consumer discretionary sector of the stock market. “The lower prices customers are looking for will weigh on company margins and earnings,” they warned.
Will Daniel
Will.Daniel@fortune.com
