Cyber Monday kicks off amid ‘difficult operating environment for retailers’: Analyst

Moody’s Senior Vice President Christina Boni joins Yahoo Finance Live to discuss Black Friday and Cyber Monday, the holiday shopping environment for consumers, and headwinds for retailers amid elevated inventories and inflation.

Video Transcript

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- Shoppers got busy the day after Thanksgiving this year and they didn't even have to leave their homes to do it. Online sales set a new record on Black Friday, topping $9.1 billion for the first time ever, that's according to Adobe Analytics. And Cyber Monday sales are expected to continue breaking online shopping records. But our next guest isn't too optimistic about the retail sector long-term. Joining me now is Christina Boni, senior VP at Moody's Investor Services. Now, Christina, you've actually lowered your 2022 forecast for retail and apparel. What are the factors driving that?

CHRISTINA BONI: Yes, well, it's still a very difficult operating environment for retailers. We're still seeing a very over inventoried situation. Supply chain challenges earlier this year left retailers were just too much inventory and the perfect storm came with the consumer starting to slow at the exact same time they were getting this inventory.

- So then when we actually take a look at these Black Friday sales, when we factor in inflation, how successful actually was it?

CHRISTINA BONI: Well, it's early days. We haven't had normal traffic patterns in a few years now, given the pandemic. So we are seeing that the consumer wants to be out, wants to be back in stores, wants to get back to the normal patterns. What will be the telling signs is as we move into the December period and we go into that traditional lull before we get to the days prior to the holiday itself. So it's early days, this is just [INAUDIBLE] component.

- And in terms of some of the sales that we're seeing, we saw that Walmart dominated Black Friday searches, up 386% year-over-year, according to Adobe. What is Walmart getting right? I know we talked about inventory, but what is Walmart doing right, you think, versus other retailers?

CHRISTINA BONI: Well, Walmart is skewed towards those necessities and we're seeing that consumers are very focused on necessities at this point, given that their wallets are being eaten by energy and food. And Walmart is big in the food category, so that's part of it. And they're providing value. And we're seeing that even the high income consumer is starting to skew and move towards looking for that value.

- And it's interesting because as we look at what people were spending on, electronics, toys, and exercise equipment were the biggest sellers, of more than 200%-- more than that actually-- versus a typical day in October, according to Adobe. But where is the bulk of this discretionary spending coming from? We keep hearing this tale of the two sets of consumers.

CHRISTINA BONI: Well, two sets of consumers, meaning that lower income consumer is seeing their wallet being shrunk and the high end consumer is still had significant savings. And we've seen that in recent months that the savings are continuing to decline, that there is economic uncertainty out there. We are predicting that unemployment is also going to continue to rise. And all that factors in to how the consumer is willing to spend.

- And so when do you expect that tide to turn because the consumer still resilient at the moment? But as we see a rise in buy now, pay later, a rise in more credit card debt, how long can the consumer keep this up do you think?

CHRISTINA BONI: Well, it gets more challenging. The consumer is also looking at such high price increases. And as we go into next year inflation is moderating, but there is still significant pressure on price and it's going to be very difficult for retailers to take more pricing. So we're seeing that pullback in units, even though we see sales rising. It's not units rising, it's actual inflation that we're seeing. The consumer is spending more, but getting less.

- And we know that this spending started before Black Friday, these sales seem to come earlier and earlier. So then by the time we factor in Cyber Monday and the credit card bills start coming due at the beginning of January then, when do you think all of this is going to start coming into better alignment?

CHRISTINA BONI: Well, I think as we go into next year and we start to see that costs are starting to decline, we're seeing that ultimately that there won't be as much pricing pressure, that will help the consumer. But unemployment still remains a factor. We're still seeing the Fed continuing to raise rates. All those things really factor into how the consumer's wallet is and what the consumer is willing to do. You know, our negative outlook is basically looking for that. The first half of next year is going to be challenging.

- We'll certainly be keeping tuned to that, a big thank you. Christina Boni, the senior vice president at Moody's Investor Services. Thank you so much.