Retailers Brace for Split Holiday Season as Consumer Diverges

The holiday shopping season is shaping up to be one of the most bifurcated in a decade, according to guidance from major U.S. retailers and card spending data. Upper-income households continue to spend freely, while lower- and middle-income consumers show mounting stress.

Luxury goods retailers have reported double-digit comparable sales growth through the first three weeks of October. Off-price and value formats are also performing well, with several national chains raising full-year guidance.

Mid-tier department stores and specialty apparel retailers have been more cautious. Several have pulled forward promotional calendars, and inventory-to-sales ratios in the sector are at their highest level since 2023.

"You are seeing an hourglass consumer," said Jonathan Pike, retail analyst at Harborview Partners. "The top and the bottom are healthy. The middle is being squeezed by cumulative inflation, higher rent, and auto loan delinquencies."

E-commerce is expected to grow 9% year-over-year during the November-December period, slightly ahead of total retail growth. Mobile commerce now accounts for 62% of online orders, and social commerce platforms have emerged as a meaningful channel for younger shoppers.

Tariff exposure remains a wildcard. Several major retailers have warned that costs on apparel, footwear, and consumer electronics will rise in the first quarter if current trade policy holds, potentially compressing gross margins by 100 to 150 basis points.