Bain & Company’s annual U.S. retail holiday forecast sees healthy but below-average sales growth for the upcoming season, with a 4.0 percent year-over-year (y/y) increase in November and December retail sales, totaling over $975 billion.

This 4.0 percent gain is below the 10-year average of 5.2 percent and would also fall short of the 2024 Holiday selling period results, which came in at 4.2 percent, according to U.S. Census Bureau data. Bain notes that the moderation from the 10-year average underscores consumer caution, although factors such as rising wages, stock market strength, and possible interest rate cuts could still boost sales.

Bain’s report follows a Holiday Outlook survey from PwC, formerly PriceWaterhouseCoopers, which forecasts an average 5 percent decline from 2024 — the first notable year-over-year decline since 2020. PwC attributed the decline to rising prices, new tariffs and the higher cost of living.  Deloitte also released its Holdiay forecast, calling for an increase between 2.9 percent and 3.4 percent for the season.

Bain’s survey shows that U.S. consumers, when compared to last year, plan to shop more in-store, with an estimated sales growth of 2.75 percent y/y, contributing 2 percent of overall growth, with the strongest gains in clothing and accessories, general merchandise, excluding department stores, and health and personal care, which are poised to grow 5 percent or more. In contrast, Bain found that sales in other sectors, such as electronics and appliances, building and garden, and furniture stores, are expected to decline.

Growth from non-store sales, which includes e-commerce and mail orders, has slowed to 7 percent. This represents a decrease from 9 to 10 percent growth in the same period over the past two years. Still, non-store sales are expected to account for 50 percent of all sales growth, the report concludes.

Tailwinds Could Offset Headwinds Weighing on Shoppers
Bain said its proprietary Consumer Health Index shows U.S. households across income groups reported a worsening fiscal outlook in August. Among upper-income households, which account for 54 percent of consumer spending, both outlook and spending intent remain high compared to last year. However, recent data indicate that they are slowing.

The firm said financial strain is clear. Severe credit delinquencies (90+ days overdue) have risen about 3 percent y/y to their highest level since 2011, mainly among borrowers under age 30. Savings rates remain low. Labor force participation fell 0.4 percentage points in August compared with a year earlier. This marks the fourth consecutive monthly decline and reverses the upward trend that had been in place since the pandemic.

Despite these pressures, Bain believes several factors could support nominal sales growth. Average hourly wages grew 3.7 percent y/y in August, outpacing inflation and the Consumer Price Index (CPI), which grew 3.1 percent. This gives consumers more confidence and spending power. The S&P 500, a stock market index that tracks the performance of 500 leading companies listed on U.S. stock exchanges, is up 21 percent compared to 2024, likely boosting wealth perceptions among higher-income households. Potential interest rate cuts could also boost consumer sentiment ahead of the holidays.

“This holiday season will be a mixed one for U.S. retailers,” said Aaron Cheris, a partner in Bain’s Retail practice. “Consumers are cautious and facing financial pressure, but they are also feeling the lift from higher wages and a strong stock market. Leading retailers will strike the right balance — leaning into value, creating warm human experiences while implementing new technologies, and capitalizing on big events like Black Friday to capture share from competitors.”

Bain outlines four ways that retailers can outperform for the upcoming holiday season:

  • Go big on sales events. Ten percent more consumers intend to shop on Black Friday and Cyber Monday compared to last year.
  • Lead with sharp Key Value Items (KVI) pricing and emphasize value. With 55 percent of consumers stating that high prices will impact their holiday budgets, retailers should emphasize value over price.
  • Keep experiences human, even with AI. As more consumers plan to shop in-store, retailers should enhance their frontline staff with technology while maintaining a personal service approach.
  • Use timely, personalized ads. With 30 percent more consumers open to sponsored ads this year, well-targeted campaigns can influence consumer shopping decisions.