Is a Happy Holiday Season for Retailers in the Forecast?

For US retailers, the two biggest seasonal spending events are the holiday season and back-to-school. Given where it falls in the calendar, back-to-school retail spending can serve as a stress test for the US consumer heading into the end of the year. Historically, back-to-school season has been a highly resilient spending event with parents willing to cut back in other areas, utilize buy now, pay later programs or work overtime hours to get everything they need for their children.

The National Retail Federation (NRF) projects K-12 spending to reach $43.3B in 2026, an increase of nearly 10% from last year’s level.¹ NRF estimates spending to be split between electronics ($14.7B), clothing and accessories ($12.5B), shoes ($8.7B) and school supplies ($7.3B). Themes from the back-to-school season this year include a focus on affordability, value and convenience. Families are planning to spend around sales and promotions, elongating the selling season.

For the remainder of this school season, PPM expects continued consumer resilience despite increased pressure on the low-end consumer amid higher gas prices. While spending growth is not always correlated between the back-to-school and holiday seasons, we also expect the consumer to remain resilient for the 2026 holidays but with an elevated focus on promotions which may pressure retailer margins.

In fact, unlike the back-to-school season, holiday shopping has not experienced negative year-over-year growth in the past 15 years. However, in years with positive back-to-school growth, holiday spending growth has been two percentage points higher on average compared to years of negative back-to-school growth (5.6% vs. 3.6%). An increase of 5.6% from 2025 holiday spending would translate to nearly $1.1T in retail sales for the 2026 season, with value-operators or those retailers with an omni-channel infrastructure being better positioned to benefit given the aforementioned margin pressure from promotions.²