Amid Monthly Dip, Year-Over-Year Growth Highlights Consumer Resilience
By Jonathan Silver, CEO of Affinity Solutions
After a better-than-expected holiday season, January 2025 saw a pullback in consumer spending. Total retail sales (excluding automobiles and gasoline) fell 1.07% month-over-month (MoM), and core retail sales (excluding restaurants in addition to auto and gas), fell 1.27%, both seasonally adjusted.
However, the CNBC/NRF Retail Monitor, powered by Affinity Solutions, reveals that while retail sales dipped compared to December, there was significant year-over-year (YoY) growth with total retail sales increasing 5.44% YoY and core retail sales increasing 5.72% YoY, both unadjusted.
Those figures are encouraging, despite January job growth hitting a bit under expectations, inflation up slightly, and wage growth only up 1% from a year ago. The January retail sales performance is showing consumer behavior aligned with broader macroeconomic trends.
New Year, New Me Elevates Personal Care Spending
Health and personal care stores experienced a notable boost in January, with sales increasing 0.77% MoM and an impressive 10.39% YoY.
The surge is likely driven by New Year’s resolutions and greater health consciousness, with people spending more on products to improve physical well-being, mental health, and self-care. This includes continued demand for vitamins, supplements, fitness equipment, and skincare.
This category is also getting a boost from the staggering popularity of social media influencers touting products that promote a balanced and healthy lifestyle. The convenience and accessibility of finding products online and in-store also helps to drive sales, and we expect health and beauty to continue to thrive in 2025.
Threads of Change in Clothing Sales
The clothing and accessories sector was a mixed bag, with sales decreasing 2.96% MoM but increasing 7.67% YoY, indicating a positive outlook for clothing heading into the pre-spring shopping season.
The monthly dip in sales is not surprising as many consumers tighten their budgets post-holidays. We anticipate Presidents Day deals in February to keep the sector on track, with retailers like Abercrombie & Fitch, American Eagle, Aerie, Columbia, and Gap promoting notable deals.
Clothing retailers can also leverage seasonal shifts to draw customers in. As stores start to change displays from winter coats and sweaters to t-shirts and bathing suits, they can attract shoppers looking to capitalize on end-of-winter sales or those wanting to refresh their closets with new trends.
Home Furnishings Chill Out
The furniture and home furnishings category faced significant challenges, with a 2.03% MoM and 0.27% YoY decline in January, suggesting a slowdown in big-ticket purchases following the holidays. Many consumers entertain friends and family at home in December and take the opportunity to invest in holiday decor and furnishings to spruce up their homes.
The beginning of the new year often results in a spending lull in major home-related purchases and other non-essential products. Furniture and home furnishings retailers should consider extended, select discounts and promotions around Presidents Day weekend in February to encourage customers to buy.
Preparing Retailers for Success in 2025
Consumers are showing s combination of resilience and cautious optimism despite a slower January. The ongoing challenge of high prices will continue to force consumers to make strategic choices about where to spend their dollars in the coming months. We’re seeing savvy shoppers direct their spending across different categories, striking a balance between essentials and nonessentials– propelling certain sectors forward while presenting hurdles for others.
As retailers navigate 2025, they’ll need to keep a close eye on the threat of tariffs, inflation, and job and wage growth to win savvy shoppers. 31% of consumers indicate they will prioritize essential purchases if prices rise, and 25% will reduce the number of items they buy. Loyalty programs, discount deals, and the right advertising messages will be key.
To stay ahead, understanding these shifting consumer patterns is paramount.
