Ex-Target exec says holidays disappointing, shoppers ‘running out of money’

Former Target Vice Chairman Gerald Storch warned Thursday that holiday spending is likely to disappoint this year as inflation-hit consumers run out of savings and curb spending due to geopolitical uncertainties.

“It’s very clear that consumers are running out of money,” Storch, also the former CEO of Toys R Us in the 2000s and early 2010s, told FOX Business. “They are increasingly stressed by inflation and the depletion of their pandemic-era savings.”

When asked about his expectations for the Christmas business this year, Storch was blunt: “[I don’t expect] Too much, honestly.”

Storch pointed to persistent inflation that has kept prices high – putting a strain on consumers’ wallets – and a tense geopolitical atmosphere as former President Donald Trump and Vice President Kamala Harris remain neck-and-neck ahead of the election. Races are going on and war is raging in Gaza and abroad in Ukraine.

The longtime retail executive’s dire warning comes shortly after a string of strong economic data.

Retail sales rose 0.4% in September, beating expectations and painting a picture of a resilient consumer, according to a Commerce Department report released Thursday.

While jobless claims rose shortly after Hurricane Helene’s devastation hit southeastern states, the number of Americans filing unexpectedly fell last week, another good sign for the economy.

But Storch said those numbers aren’t so reassuring when put into context.

“If you look at the last few years, what you see month after month, what everyone is talking about, consumer spending is still there,” he said. “That may be true, but they are spending less as inflation increases.”

For example, while retail sales rose 1.7% last year, the inflation rate was 2.4% over the same period, Storch said.

So consumers are “spending more and getting less” as prices rise faster than sales, he said.

U.S. holiday sales are expected to rise as much as 3.5% this year, the National Retail Federation predicted Tuesday.

While this forecast signals revenue growth, it predicts the slowest growth rate in six years.

NRF CEO Matthew Shay said he expects consumers to be price-conscious and pragmatic and to prioritize discounts and deals when searching for holiday gifts.

“I would think so [if] We can achieve growth [the] “At a 2.5% range that would be pretty good, but that’s not very good,” Storch told FOX Business. “In the heyday there, we really wanted to see something more like 4% growth.”

Not only is a decline in consumer spending challenging for retailers, they are also facing a particularly tense holiday season.

“By the way, they have the shortest holiday season you could possibly imagine, so that’s a disadvantage for retail,” Storch said. “Now and the time between Thanksgiving and Christmas is very, very short, so it’s going to be bad.”

Consumers are likely to become more cost-conscious as geopolitical tensions brew in the U.S. and around the world.

“The election will put a strain on things and also the geopolitical situation, so I think it will be a pretty weak Christmas,” Storch said.

Meanwhile, retailers are already in a weak position as they prepare for a busy holiday season.

Pharmacy chains — including Rite Aid and CVS — have closed stores. Just this week, Walgreens announced it will close 1,200 stores over the next three years.

Home furnishing chains like Big Lots and LL Flooring have filed for bankruptcy and announced plans to close stores.

And Dollar Tree plans to close nearly 1,000 of its discount stores.

“Many of these retailers expanded very quickly. Walgreens has about 4,000 stores – that’s incredible. The same goes for Family Dollar,” Storch said. “This big bet on physical locations [came] Just as the consumer was slowing down and of course the internet was growing.”