The news: A slate of retailers boosted their outlooks following strong Q3 performances, a positive sign as the industry heads into the most important shopping period of the year.

• Best Buy now expects FY comparable sales growth of 0.5% to 1.2%, compared with its prior range of -1% to 1%, after delivering Q3 revenues and earnings above expectations.
• Dick’s Sporting Goods forecast FY comparable sales growth of 3.5% to 4% for its namesake banner, above the consensus estimate for a 3.6% increase and up from its previous forecast of 2% to 3%. The retailer also raised its earnings per share (EPS) outlook by 35 cents.
• Abercrombie & Fitch raised the low end of its FY sales and earnings outlooks after another strong quarter in which sales rose 6.8% YoY. It now expects FY sales between 6% to 7%, and EPS of $10.20 to $10.50.
• Kohl’s upgraded its EPS, revenues, and comparable sales guidance after beating Q3 expectations.

The big picture: The upbeat earnings point to ongoing consumer resilience—a trend also evident in September retail sales figures. While MoM growth has slowed, the numbers look solid on a YoY basis, even after accounting for inflation.

• Retail sales increased 4.3% YoY in September, outpacing inflation, with increases in 11 of 13 categories, per the US Commerce Department.
• For Q3 as a whole, total retail sales were up 4.5% YoY, with particular strength in autos (up 5.2%), health and personal care (up 6.4%), apparel (up 7.5%), and nonstore retail (up 7.5%).

Despite this spending data, the environment is more nuanced.

• Consumer confidence slid in November by the most in seven months, per the Conference Board, as households broadly grew more pessimistic about the economy, labor market conditions, and their financial situations.
• The University of Michigan’s sentiment index also fell to near-record lows due to continued frustration over higher prices, weakening income growth, and concern about the government shutdown.

What retailers are saying: With finances under strain, consumers are being more intentional about how they spend.

• Best Buy CEO Corrie Barry said customers are “deal-focused and attracted to more predictable sales moments.” They are being more measured about what they buy: Much of Best Buy’s sales growth in the quarter was fueled by consumers’ replacement of phones and laptops, rather than a discretionary splurge.
• Multiple retailers, including Gap, Target, and Dick’s, have cited newness as an important factor in driving sales. On the flip side, companies that lack compelling and innovative products—like Foot Locker—are struggling to keep shoppers engaged.

What this means for the holiday season: The outlook for holiday spending is notably stronger than it appeared at the start of the year, when tariff concerns looked likely to derail consumers’ purchase plans. We expect sales in November and December to rise 3.6% YoY; though this is a slowdown from last year’s 4.4% growth, it is a significant upgrade from our May forecast.

While spending is proving resilient—especially among higher-income consumers—retailers will have to work hard to make their case to shoppers. Beyond discounts, having the right assortment, offering convenient delivery options, and providing engaging in-store experiences will be essential to a successful closeout of the year.