Wall Street Lunch: Gen Z Plans To Slash Holiday Budget (undefined:M)

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Holiday spending seen posting biggest decline since pandemic. (0:15) Macy’s rallies, while Dollar Tree warns on tariffs. (1:35) Job openings slump. (3:11)

This is an abridged transcript of the podcast:

Our top story so far, U.S. holiday spending is projected to see its sharpest decline since the pandemic, driven by cautious spending among shoppers, especially Gen Z, due to economic uncertainty.

A PricewaterhouseCoopers survey conducted between June and July of around 4,000 U.S. consumers, found that shoppers plan to spend an average of $1,552 per person, a 5.3% decrease from last year. This drop is the most significant since 2020, when average spending fell 7.6% to $1,187.

More broadly, 84% of consumers said they plan to reduce spending over the next six months, especially on dining out (52%), clothing (36%) and big-ticket items (32%). They cited rising prices, new tariffs and the increasing cost of living as key concerns.

“Consumers are approaching holiday purchases more deliberately, deciding what matters most, where to scale back and what feels worth the splurge,” PwC said.

Gift spending is seeing the largest decline, dropping 11% to an average of $721 from $814 in 2024, while spending on travel and entertainment remains stable, each rising by 1%.

Gen Z is cutting back more sharply than other groups. Gen Zs said they plan to slash holiday budgets by 23%, marking a sharp reversal from 2024, when Gen Z’s holiday budgets surged 37% Y/Y. Baby boomers, meanwhile, plan to increase their spend, with millennials holding steady.

Among active stocks, Macy’s (M) push to return the iconic department store to profitability showed progress in the second quarter, with better-than-expected results — including positive comparable sales — prompting the company to raise its FY26 outlook.

For the full year, the company now expects adjusted EPS of $1.70 to $2.05 from initial guidance of $1.60 to $2.00, with a midpoint of $1.87 that is above the $1.78 consensus estimate. Total sales guidance was increased to a range of $21.15 billion to $21.45 billion from $21 billion to $21.4 billion, straddling the $21.18 billion estimate. Comparable store sales are now expected to be down 0.5% to down 1.5% versus the prior range of down 0.5% to down 2%.

Dollar Tree (DLTR) is under pressure as investors seized on the retailer’s guidance update.

The company noted that its second quarter results were aided by positive ticket and traffic trends, as well as a $0.20 tariff-related timing benefit. But it warned that the benefit will reverse in Q3.

Dollar Tree updated its prior EPS guidance from continuing operations to a range of $5.32 to $5.72. The midpoint of that range was slightly below the consensus expectation. The retailer also warned that tariff-related costs would pressure earnings in the current quarter and beyond, based on its current assumptions on tariff levels.

And Campbell’s (CPB) is trading higher after it topped earnings expectations, with sales a hair below the consensus.

But looking ahead, Campbell’s expects fiscal 2026 revenue to be flat to down 2%, with EPS landing in a range of $2.40 to $2.55 (midpoint $2.475) vs. $2.57 consensus. The company said that despite significant mitigation efforts, tariffs have reduced its earnings outlook for the upcoming fiscal year.

Looking to the economy, job openings declined to 7.181 million in July from 7.357 million in the prior month (revised from 7.437 million). The most recent month’s number missed the 7.375 million consensus, signaling that labor demand continues to weaken.

The job openings rate of 4.3% slipped from 4.4% from June and 4.5% in July 2024. The quits rate, at 2%, was unchanged from the previous month and compared with 2.1% in last year’s July.

Pantheon Macro economist Samuel Tombs says: “The downward trend in job openings is now clearer, after an 80K downward revision to June and the 176K month-to-month decline in July. Openings in July were 78K above their September 2024 low, but after revisions, we expect to find they have fallen to a new post-Covid low.”

Odds of a quarter-point Fed rate cut next month rose to above 95%.

In other news of note, Chick-fil-A is looking to spread its wings to global markets. The restaurant company is preparing to open its first permanent international locations in the United Kingdom and Singapore in 2025. The launches represent the company’s commitment to establishing an international presence beyond North America, with a particular focus on Europe and Asia.

In the U.K., the chain’s first restaurant will open in Leeds sometime this autumn, with another five planned openings spaced over two years and backed by an investment of more than $100 million over the next decade.

Similarly, Chick-fil-A aims to introduce its dining experience to Singapore before the end of 2025, projecting a ten-year investment of $75 million in that market. Chick-fil-A’s overall international plans are ambitious, with a $1 billion investment and a goal to enter five global markets by 2030, including Canada and Puerto Rico,

And in the Wall Street Research Corner, Morgan Stanley strategist Mike Wilson is eyeing a re-rating of the Healthcare (XLV) sector, whose forward P/E sits near historical lows.

Three things could spark a change in sentiment.

The Fed rate-cutting cycle and the forecasted decline in 10-year yields (US10Y) to 3.45% by the middle of next year could provide a “clearer tailwind for rate sensitive areas of the market.”

In addition, pharma, biotech and life sciences, along with healthcare equipment and services, are showing “material improvement” in earnings revisions breadth, Wilson said.

And a “reemergence of growth risks and an associated pause in pro-cyclical leadership” could potentially improve Healthcare’s relative performance, though this isn’t considered the baseline scenario.