Key Takeaways
- Amazon will be the first of America’s major retailers to report fourth-quarter earnings when it posts results after markets close on Thursday.
- After a record-breaking holiday shopping season, analysts expect retailers to report strong sales.
- Consumer spending growth is expected to accelerate this year, but analysts warn tariffs and a stock market downturn could curb momentum.
Amazon will kick off the earnings reporting season for major retailers this week, offering investors a snapshot of consumer spending in the wake of a blockbuster holiday season.
Amazon (AMZN) is scheduled to report fourth-quarter results on Thursday, followed by Walmart (WMT) on February 20. Costco (COST) and Target (TGT) are both slated to report in early March.
Retailers are likely to report strong sales after a record-breaking holiday shopping season that exceeded expectations, said Mark Matthews, executive director of research at the National Retail Federation.
“Consumers remain engaged,” Mastercard CEO Michael Miebach said on the company’s earnings call last week, according to a transcript from AlphaSense. “Affluent consumers have benefited from the wealth effect, while the mass segment remains supported by the labor market.”
Sales are expected to rise slightly in 2025, but analysts warn tariffs or a stock market correction could curb the momentum.
What Analysts Expect From the Big Retailers This Year
UBS analysts estimate Amazon, Walmart, and Costco accounted for 40-50% of all retail sales growth (excluding automobiles) in the past year.
Online shopping has gained ground as Americans have hunted for bargains and convenience. Amazon moved more merchandise than ever during its main holiday sale, and appears poised for a 10% year-over-year increase in the value of goods sold on its platform in 2025, UBS analysts said.
Walmart has also made shopping more convenient by expanding its delivery service, which has attracted high-income households, executives said last quarter. Granted, the chain still appeals to bargain-hunters, and consumers’ search for value could help Walmart achieve a 2-4% year-over-year increase in same-store sales in 2025, UBS said.
Costco has been ramping up its e-commerce business, and its long-time focus on value is resonating with consumers, UBS analysts said. They project that same-store sales at the wholesale club could grow 3.8-5.8% in 2025.
Discounts have been playing a big role in driving sales at Target, the company said in November. Consumer pullbacks can be a challenge for Target, which stocks fewer essential items than some of its counterparts. But UBS said the replacement cycle for discretionary items may benefit Target, which could report flat to 3% growth in same-store sales this year, according to its estimates.
What Factors Are at Play?
Consumers are estimated to have spent about 2% more on goods in 2024 than in 2023, and are expected to increase their expenditures another 2.5% this year, according to a UBS forecast.
UBS analysts argue conditions are favorable for robust spending: Inflation has moderated, while the job market remains stable and stocks have gained value. They expect tax cuts, reduced government spending and deregulation under the Trump administration, could accelerate economic growth and, subsequently, “supercharge” apparel and shoe sales.
But a range of outcomes, including a drop in retail spending, are possible. Tariffs broadly imposed on goods from China, Mexico, and Canada could have “meaningful consequences,” adding 0.3 to 0.6 percentage points to inflation over the following three to four months, analysts at Morgan Stanley said. They estimate that could ultimately halve the rate of consumer spending growth in 2025.
A correction in the stock market is another risk, according to Deutsche Bank analysts, who estimated appreciation of equity investments drove about one-third of consumer spending growth last year.