Retailers are about to tell us how American consumers are doing

It’s quarterly earnings season for retailers across the economy.

On Tuesday, Best Buy and Target both reported something of a slump in holiday sales late last year, and later this week, updates will follow from Abercrombie & Fitch, Bath & Body Works, Costco Wholesale, and Kroger. How retailers are doing can reveal something about the engine of the economy — American consumers.

The holiday season can be make or break for retailers. For Target, this past season wasn’t great, said JJK Research Associates president Janet Kloppenburg, partly due to basic execution.

“There wasn't enough product on the shelves,” Kloppenburg said. “They had stuff in the back room, but somehow it wasn't getting moved out.”

But retailers also faced headwinds that were out of their control, said Anthony Chukumba, managing director and senior research analyst at Loop Capital.

“So you have this consumer that has been buffeted by elevated inflation for quite some time,” Chukumba said.

Add growing job concerns, and consumers could remain wary about discretionary spending in the year to come, he said.

“I think 2026 is gonna be a slog, just like 2025 was, quite frankly,” Chukumba said.

Oil prices are already rising due to the war in the Middle East, Chukumba said, which could further strain consumers and retailers alike.

But Jessica Ramírez, co-founder and managing director at The Consumer Collective, said there are some opportunities for retailers, including in beauty products and work attire.

“In a time where the consumer is concerned about holding onto their job, they will be wanting to dress to impress and feel good,” she said.

Kloppenburg said many Americans will also see higher than usual tax refunds this year.

“Usually we don't see the consumer save when they get a little treat, we see them spend it right away,” she said.

That could provide a temporary boost for retailers.