德勤咨询：2024年美国零售业展望

Deloitte。

2024USretailindustryoutlook:

Lookingforloyaltyinallthe

rightplaces

Rekindlingprofitableloyaltythroughexperiences,

personalization,andtrust

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

2

Contents

Introduction

3

OpportunityNo.1:Leanintoloyaltyprograms

6

OpportunityNo.2:Enhanceomni-experience

throughin-storeinvestments

7

OpportunityNo.3:Driveindividualengagement

atscalewithtrustworthyAI

9

Conclusion

10

Appendix

11

3

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

Introduction

Thelasttwoyearshavebeenanythingbutordinary.Consumerswitnesseda40-yearinflationaryhighinJune2022and11FederalReserveratehikesbyJuly2023.Giventhisvolatility,it’sreasonabletoassumethatconsumers’collectivepsychewouldbebruised

andtheywouldretreatfromthemarketplace.

However,consumershaveendured,surprisinganalystsby

challengingconventionalwisdom.Infact,consumerscontinuetheirconsumptionbinge,withsomebenefitingfromwageincreaseswhileothersarepresumablyburningthroughsavingsandaccumulatingdebtevenaseconomicuncertaintycontinuestoloom.Will2024

finallysignaltheendofthisspendingspree?

Expertopinionsvary.Economistsareencouragedthatmoderatinginflationandatightjobmarketwillsupportcurrentconsumptionrates,thoughthoseratesmayslowdown(seebelowformore

aboutoureconomicforecast).ButretailersandWallStreetanalysts

remainuncertainthatdebt-loadedconsumersfacingacost-of-living

squeezecanmaintaintheirrecentspendingtrends,especiallyon

discretionarygoods.1Onethingiscertain:Inflationhasleftitsmark.

DespiteinflationapproachingtheFederalReserve’stargetrateof2%inthelastsixmonths,threeinfourconsumersremainconcerned

aboutrisingprices.2Withthisinflationmentalitylockedin,consumerbehaviorhasbeenconfounding—evenforseasonedretailers3—

asconsumersconsidertrade-offs,tryoutthecompetition,andhuntforthebestdeals.

Asretailersfaceanuncertain2024economicoutlook,focusing

ontrustcouldleadtoprofitableloyalty.

USEconomicForecast[i]

AnotefromDeloitteUSEconomistsDannyBachmanandAkrurBarua:

TheUSeconomyseemstohaveavoidedarecessionevenasinflationhasdropped.Thisisgoodnews,especiallyatatimewhengeopoliticaltensionsarerising,growthinkeyUSeconomicpartnersisslowing,andthereisuncertaintyoverbudgetfunding.

Consumershavebenefittedfromrisingwagesduetoastronglabormarketanddeclininginflation.Theyhavealsodrawn

downtheirpandemic-erasavingstofundmorepurchases.Thisdipinpersonalsavings,however,willweighonconsumerspendingin2024–2025.Inaddition,consumersfaceheadwindsfromhighrents,risinghouseprices,andrepaymentofstudentloandebt.

Twokeytrendswillshapethefuturebusinessenvironment:tighterlabormarketsandhigherlong-terminterestrates.First,slowlaborforcegrowthandcontinuedhighdemandrequirecompaniestoofferhigherwagestolower-skilledworkersandtobemoreimaginativeabouthiring.

Second,long-terminterestratesareunlikelytoreturntothelowsofthelate2010s.TheslowingofChina’s

savingsgrowth,aneedforlargeinvestments(publicorprivate)toaddressclimatechange,andeffortsto

buildsupplychainresiliencywilllikelykeepcapitaldemandsstrong.

Deloitte’sbaselineforecastanticipatescontinuedgrowthinconsumerspendingatarateslightlybelowGDPgrowth(figure1intheappendix)duetofallinginflation,lowunemployment,andincreasing

productivitygrowth.Theaftermathofthepandemicledtoashiftinconsumerspendingpatterns,withthedollarvalueofdurablegoodsincreasing43%vs.a24%riseinspendingonservicessinceQ42019.Thisisunlikelytocontinue,withtheforecastsuggestingaslowergrowthtrajectoryfordurablesspendingrelativetoconsumptionandincomeoverthenextfiveyears.

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

4

Istherealoyaltycrisis?

Thepandemic-inducede-commercesurgeandsupplychain

disruptioncausedaloyaltycalamity.Threeinfourconsumerstestednewbrandsandstoresastheyfacedemptyshelves.4Whenlife

begannormalizing,retailersfocusedonenticingcustomersbacktotheirstoresandkeepingthemintheso-calledfamily.Then

inflationhit.

Areyouawinner?

Whowinstheincrementaldollarinaslowergrowth,inflation-bitconsumerenvironment?Thedata(figure1)suggestsdiscountretailers,massmerchants,andclubstoresareedgingout

specialtyformats.

One-halfofretailexecutivesexpectconsumerstovaluepriceoverloyaltyin2024.5Thefactthatthenewe-commercediscountentrant,Temu,wasthemostdownloadedAppleiPhone®appintheUnitedStatesin20236suggeststheirviewisnotunfounded.

Two-thirds(64%)ofretailexecutivesalsoexpectinflation-wearyconsumerstopurchasefewergoods—somethingthatalso

concernsconsumerpackagedgoods(CPG)companiesastheypivottoprofitablevolume.7ManyCPGcompanieshavesuccessfullyincreasedpricesinthepastfewyears,butthatlevermayhave

runitscourse.

Figure1.Consumersspendingatdiscountretailersincreasedsignificantlyyear-over-year

Discount

Mass

Club

Electronics

Footwear&apparel

Off-price

Homeimprovement

Sportinggoods

Department

-19.9%

+26%

+10%

+4%

19.4%

+3%

+4%

+7%

27.0%

+0%

+6%

+13%

16.7%

-1%

-12%

+4%

23.0%

-4%

-1%

+18%

-2.5%

-5%

-8%

+12%

-2.6%

-7%

-10%

+7%

30.5%

-9%

-10%

+6%

22.8%

-11%

-8%

+29%

2022-20232021-20222020-20212019-2020

YoY%growthbyRetailSubsector,October–November2019–2023

Source:AffinitySolutions,Inc.–DeloitteInSightIQAnalysis,October–November2021–2023;

inclusiveofinflationaryimpacts.

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

5

Whatdrivesloyalty?

Asconsumersfocusonprice,whatisbehindafairprice?Thereisapositiverelationshipbetweenbrandsthatconsumersratedashavingthemostreasonablepricesandtrust.Forexample,thetopfourautobrandsratedforpricingfairnessscored1.4timeshigherontrustthantheindustryaverage.8Trustedcompaniesfinanciallyoutperformtheirpeersbyuptofourtimes,andcustomerswhotrustabrandare88%morelikelytobuyagain.9Astrustimproves,customersare1.9timesmorelikelytodefendabrandagainst

criticism.10Inshort,trustdrivesgreaterloyalty.

Whocaresaboutloyalty?

Inourexplorationofoutperformingretailers,weseeafocusonrekindlingloyalty.

Weanalyzedthereturnonassets(ROA)anddebt-to-EBITDAratioduringFY2020-22forthetop39US-basedretailers(seeappendixtables1–3formoredetailsonourfinancialanalysis).11Overthese

turbulentyears,theoutperformersweidentifiedgrewprofitably,ensuredhealthydebtlevels,andprioritizedloyalty.

Outperformersbestedtheirindustrypeersinrevenuegrowth,margins,andreturnoninvestedcapital.Ouranalysissuggests

theyweremoreefficientatassetutilizationandcapitalallocation.Theyalsoeffectivelyreprioritizedinvestmentsbasedonnew

opportunitiesandthreats.Andseveralleanedintooptimizingtheiroperationsthroughmodernizedtechnologies.

Outperformersalsomentionedloyaltyandassociatedelementsliketrust,engagement,retention,netpromoterscore,andlifetimevalue1.25timesmorefrequentlyinearningscallsthantheirunderperformingpeersfromJanuary2020toDecember2022.12

Eightin10retailexecutivesfromoutperformingcompaniessaidtheircustomerloyaltywaswellabovetheindustryaverageoverthepastthreeyears,comparedtofivein10underperformingcompanies.13

Ouranalysisalsoindicatesthatcustomerloyaltyisanimportantdifferentiatorforoutperformers.Most(65%)retailexecutivesfromoutperformersexpectrevenuegrowthof5%ormorein2024,

while71%ofexecutivesfromunderperformersexpect1%to4%growth.14Lookingahead,analystsexpecttheseoutperformerstobeapproximately2.6timesmoreprofitablethantheirretailpeersoverthenexttwoyears(seeappendixtable2).

Whileoutperformersdomanythingsright,profitableloyaltyisakeyfocus.

Rekindlingprofitableloyaltyin2024andbeyond

Withbargain-huntingconsumersskippingfromsourcetosourceandcustomeracquisitioncostsincreasing222%inthepastdecade,15loyaltyprogramsremainahottopic.Andwiththeopportunitytoutilizefirst-persondatafromloyaltyprogramstocreateadditionalrevenue,it’snowonderretailexecutives’mostcitedgrowth

opportunityfor2024wasstrengtheningloyaltyprograms.16

Basedonwhatwearehearingandseeing,2024willbetheyeartorewritetheloyaltyplaybookbyputtingtrustatthecenter.Weseethreekeyopportunities:

•Leanintoloyaltyprograms

•Enhanceomni-experiencethroughin-storeinvestments

•DriveindividualengagementatscalewithtrustworthyAI

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

6

OpportunityNo.1:Leaninto

loyaltyprograms

Inthecompetitivelandscapeforconsumers’incrementaldollars,

retailersfacecompetitionnotonlyfromotherretailformatsbutalsofromleisuretravelasconsumerscontinuetoprioritizeexperiences.Additionally,householdsreplenishingtheirsavingsaccountsposesanotherchallenge,emphasizingtheopportunityforretailersto

strategicallycraftloyaltyprogramstobuildtrustandstandoutinthecurrentmarketdynamics.

Onaverage,nearlytwo-thirdsofUSconsumersbelongtobetweenoneandfiveloyaltyprograms.17However,mostconsumersuse

50%orlessoftheirmemberships,18sothechallengeforretailersisdevelopingengagingprogramsthatconvertmembersinto

users,andinturn,createprofitableloyalty.Arecentstudyfoundthatcustomerswhobelongedtoaretailbrand’sloyaltyprogramreportedanaverageof61%highertrustinthatbrandthannon-

loyaltyprogrammembers,19whileaconsumerindustrycasestudyfoundthatincreasingtrustwithexistingloyaltyprogrammemberscouldpotentiallyboostannualspendingby30%.20Thesegainswereprimarilyattributedtodeployingpersonalizedexperiencesatscale.21

Someretailershavehomedinonthisopportunity.Dillard’s

outperformedmanyotherdepartmentstorechainsinFY2020–22bydrivingcustomerloyaltythrougheffectivemerchandisingwithastrongportfolioofownedprivate-labelandexclusivebrands,22personalizedin-storecustomerservice,andhighemployeeengagement.23Ulta

Beautygrewitsactiveloyaltyprogrammembersfrom30.7millioninFY2020to40.2millioninFY2022,derivingmorethan94%ofitsannualsalesfromthesemembersinbothyears.24Asthecompanyconsidersitsloyaltyprogramakeydriverofsuccess,itlaunchedarevampedprograminJanuary2024withadditionalperksandamorepersonalizedbirthdaybenefit.25

For2024,webelievethatretailershaveanopportunitytoattainprofitableloyaltythroughpersonalization,co-branding,anddatamonetization:

Statustiering:Tieringbycustomerloyaltyallowsretailerstoofferadditionalperkstotheirtoptierinamorefinanciallyviablemanner.Manyretailersdothispublicly,andconsumersunderstandthebenefitsoftheirstatus.Consumersarealsoseekingtieredprograms,with

62%sayingtieredprogramsareimportantfeatures.26Whiletieringprogramsarenotnew,weseemoreinvestmentsoccurringbehindthescenesthattakeamorescientificapproachtosegmenting.Thisincludesprovidingdifferentoffers,benefits,andcommunicationtohighertiersandworkingtowardmigratingpeopleup.Thisstrategyhasbeenasuccessforoneretailerthatsawa98%year-over-yearretentionratefromitstop-tierloyaltymembers.27Seven-in-10outperformers

sayconsumers’expectationsfromfreeloyaltyprogramswillincrease(versusfour-in-10underperformers),indicatingthattieringmaybeawaytorewardthemostloyalconsumers.28

Co-brandingbenefits:Retailersshouldconsiderlookingfor

aportfolioofbenefitssothattheretailer(orthebrand)isnot

necessarilyresponsibleforallthebenefitsprovided.Forexample,since2021,Targethasofferedbenefitslinkedtopartnershipswiththeirstore-within-a-storeformatsfromUltaandApple.These

partnershipsallowloyaltymemberstoearn“UltaBeautyRewards”

aswellas“TargetCircle”benefitswhentheypurchaseUltaBeautyitemsatTarget(oncetheylinktheirloyaltyaccounts).Targetalso

offersitsmembersfreetrialsonvariousAppleservices(e.g.,AppleTV+®,AppleMusic®,iCloud+℠,etc.).29Similarly,loyaltymemberscanearn“SephoraBeautyInsider”pointsaswellas“Kohl’sRewards”

forSephorapurchasesmadeattheirstore-within-a-storeformatatKohl’s.30Thekeyforconsumersisflexibility:Sixin10consumersbelieveearningandredeemingpointswithbothpartnersis

important.31Retailersshouldalsoconsiderpotentialbenefitsfromjointpromotionswithtravelloyaltyprogramsinvolvingairlines,

hotels,orrestaurants.Arecentpollindicatedthatoveraquarter

ofpeopleplanningtobuyapparelwerepreparingforatrip.32By

co-brandingthebenefits,retailerscangetgreaterexposureandplugintoabroadersetofconsumerswhileprovidingexcitingbenefitswith

sharedcosts,potentiallyimproving

theprogram’sprofitability.

Monetizingdata:Some58%ofretailexecutivessaidthey’re

makingmoderate-to-majorinvestmentsinbuildingorexpandingadditionalrevenuestreams.33WiththeintroductionofApple’s

iOS™14.5in2021,themajorityofusersoptedoutofapptracking,34openingopportunitiesforbrandstostepinwherethird-partydata

hadoncedominatedthroughretailmedianetworks(RMNs:digitaladvertisingplatformsownedbyretailersthatbrandscanleveragetoreachconsumersthroughtheassetsoftheretailers).35Thesecanbeextremelyvaluable,particularlywhenaretailerhasthescaleofconsumerandshopperinformationintermsofdigitalandin-storevisits,andtheyhavetheextrafidelityofmanyofthosecustomersbeingpartofaretailer’sloyaltyprogram.Nearlytwo-thirdsofretailersshareorplantoshareloyaltydatawithRMNadvertisers.36Theseadvertisersvaluetheaudiencesthatretailerscanprovide,especiallywhentheyincludedetailsaboutloyalsegmentsandcandemonstratethereisadirectcorrelationbetweenloyaltyandpropensitytowardaparticularbrandorbehavior.Forexample,WalmartConnect

(“aclosed-loopsystemthatintegratesonlineandin-storebehaviortobuildacomprehensivepictureofWalmartcustomers”)growingtheirQ4FY2023advertisingrevenueby41%year-over-year.37

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

7

OpportunityNo.2:Enhanceomni-

experiencethroughin-storeinvestments

Thedigitalaccelerationfromthepandemicwasaboonforonline

andomnichannelshopping.Techupgradeshelpedwithsomeoftheshortfallsoftheonlineexperience,fromfittoenvisioningproductsinhomes.Socialmediaandinfluencersbroughtproductstolifeinshortvideocontent.Digitalwalletsandnewlastmileandreturnoptions

expanded,creatinglessfrictionforconsumerstoclickandcollect.

Despitetheseadvances(andhowtiredthetopicmayfeel),acohesive,consistentomni-experienceisoftenlacking,potentiallyerodingtrust.

Omnichannelinconsistenciesandfailedexecutionarepotentially

detrimentaltoloyalty.Threein4customerssaytheyaremoreloyal

tostoreswithconsistentcustomerserviceandexperiences.38A

reviewof145companies’omnichannelcapabilitiesduringCyberWeek(November21–23,2023)showedwhileBOPIS(buyonline,pickup

in-store)andBORIS(buyonline,returnin-store)werewidelyavailable,onlyonein10offeredalternativedeliverypickup,andathirdfailedtoindicatehowlongitwouldtaketoreceivearefund.Shippingwasalsoasorespot;byDecember5,onlyathirdlistedshippingcutofftimesforChristmasarrival.Andwhenwetestedtheclaimsof17companiesofferingon-timedeliveryofholidaygiftspurchasedonDecember

19,nearlyone-quarteroftheholidaydeliveryordersarrivedafterDecember24.39

Whenweexaminedtrustinvariouschannels,customerspurchasingin-storeindicatedthelowesttrustscores.40Interestingly,despitelowertrustscoresthandigitalchannels,physicalchannelsarethemost

preferredmediumofengagement,indicatingasignificantopportunityforbrandstohelpboosttrustamongaconsiderablefractionoftheircustomerbase.

Enhancingthein-storeexperiencewasatop-citedgrowth

opportunityfordrivinggrowthin2024(figure2).41Retailersarefacingunprecedentedheadwindsfromlaborcostsandavailability,aswell

aschallengesaroundshrink(seeappendixfigure2foradditional

challenges/opportunities).Theseissuesareconvergingwithpricing

pressureandhighcustomerexpectations,forcingretailerstodomorewithless—adverselyaffectingthecustomerexperience.Ithascreatedasignificantshiftinhowretailersthinkabouttheirstores,including

howtomakeassociatesmoreproductivewhilecreatingamore

consistentexperienceforshoppers,howautomationcanhelp,andhowtoreduceshrink.

Figure2.Topfourgrowthopportunitiesin2024(%ofretailexecutives)42

54%

Strengthening

loyaltyprogram

44%

Strengtheningdigital

commerceofferings

36%

Enhancingin-store

customerexperience

32%

Enhancing

omnichannel

experience

8

Enhancingcustomerexperiences

AI-poweredsmartcarts

Features:Computervisionforpersonalizedshopping.

Benefits:Instantcheckout,real-timeanalysisofcartsandshelves.

InteractiveAIsmartdisplays

Features:Recognizecustomerfacialexpressionstotailorcontent.

Benefits:Personalizedcustomer

interactionbasedonmooddetection.

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

Someretailersareplanningexpansivestoreremodelsthatcan

immediatelycreatemorepleasantenvironmentsandstickybehaviorfromconsumers.43Targetrecentlynotedthatsalesincrease2%to

4%onaverageduringtheyearoncestoresarerenovated.44Butwealsoseeanopportunityininnovativetechthatusesdatatocreateefficienciesandconsistentexperiences,potentiallybuildingprofitableloyalty(seefigure3).

Thesetechtoolsnotonlyelevatetheoverallshoppingexperiencebutalsoequipretailerswithenhanceddata,amorenuanced

understandingofshopperprofiles,andacompetitiveadvantagebyofferingapersonalizedandcompleteomni-experience.

Figure3.Innovativeretailtechnologies

Improvingoperationsandmanagement

Intelligenttags

Features:Providecontinuous

item-levelinsights.

Benefits:Real-timetracking

ofproductlocation,availability,

andperformance.

Optimizedpricingand

storedesign

Features:Analyzeandstoredata

onin-storebehaviorsandexternal

factorslikeweather.

Benefits:Dynamicpricing,andoptimizedstorelayoutandmerchandising.

AI-poweredanalytics

Features:AnalyzecrucialdatatohighlightimportantKPIs.

Benefits:Streamlinetaskprioritization,ensureproductavailability,reduce

onlinereturns,lowerwaittime,andimprovecleanliness.

Shrinkmanagement

Features:Analyzecustomerbehaviorandemotionsforsecurityinsights.

Benefits:Detertheftandimprovestoresecurity.

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

9

OpportunityNo.3:Driveindividual

engagementatscalewithtrustworthyAI

Retailwasbuiltfromasupply-focusedmodeltomeettheneedsofthemasses.Withconsumerswantingmorebespokeexperiences,

retailersarelookingforwaystopersonalizeatscale.Deloitte’sFutureofConsumerworkseesthisas“acriticaltransitionfrommass-marketapproachestostrategiesthatprioritizerelevanceforspecificconsumergroups.Werefertothisshiftasanindustrymovingfrommassto

micro.”45Retailersmakingthisshifthaveanopportunitytodelightconsumerswithproductrecommendationsandtailoredinteractions,especiallyiftheyembedtrustatthecenteroftheirdesign.

DrivingpersonalizationatscalewithAI

HalfofretailexecutivesareprioritizingAI-drivenpersonalizedproductrecommendationsin2024.However,onlyfivein10retailexecutivesareconfidentintheircompany’sabilitytouseAIeffectivelyacrosstheirbusinesses.46Asretailersgatherlargervolumesandpotentiallymoresensitivetypesofdata,usingthisinformationskillfullyisvitaltomaintainthedelicatebalancebetweenwhatdataconsumersarewillingtoshareandtheexperiencesretailerscanoffer.ConsumersarewaryofAI:Eightin10consumersfromDeloitte’sholidaystudyhadlittletonotrustinretailers’abilitytouseartificialintelligence

responsiblyintheiroperations.47Retailersalsoseethisasa

challenge,asmorethanthree-quarterssaidusingnext-generationAItechnologiesinthenextfiveyearswillstrainconsumertrustandheightentheirconcernsaroundprivacyviolations,surveillance,lackoftransparency/accountability,andjobdisplacement.48

IntroduceandbuildAIwithtrustinmind

AccordingtoDeloitteresearch,trustinabranddrops144%for

customerswhoknowabrandisusingAI.49ButdataalsoshowsthatkeepingtrustatthecenterofAIdesigncancreategreateradoptionfromemployeesandcustomersandquadruplemarketvalue.50

Thesecrettotrustisderivedfromcompetenceandintent.Retailersshouldreliablydeliverontheirpromises.Theyshouldalsoshowenoughhumanityandtransparencytodemonstratetheirbest

intentions.Tobuildtrust,brandsandemployersshouldanchortheirdesign,implementation,andmessagingofAItoolsontheFourFactorsofTrust:51

1.Humanity:WhendefiningthegoalsforAItoolsforcustomers,retailersshouldexpandbeyondthetechnicaltofocuson

buildinghumaninteractions.Toconstructthesehuman

interactions,AIshouldbetrainedwithanexpansivesetofrulestoberesponsivetothecontextofthecustomer.Forexample,ifacustomermentionsadeathinthefamily,theAImaybetrainedtobuildhumanitybysaying,“I’msorry;mycondolences.”

2.Transparency:WhencommunicatingaboutAItocustomersoremployees,messagingshouldbeanchoredwithpreciseandtangibleusecases.Forexample,retailersshouldexplainhowandwhychatbotsarebeingused,providingspecificdetails

abouttheirpurposeandfunction.

3.Capability:WhendrivingadoptionandtrustinAItoolsfortheworkforce,retailersshouldconsiderbringingthebenefitsandcapabilitiestolifetodemystifythetechnology.Forexample,

retailerscouldprovideopportunitiesforemployeestotrythesetoolsfirsthandbyofferinga“sandbox”tobuildcomfortand

familiarityinazero-riskenvironment.Additionally,theycould

highlightthebenefitsinahumanway,focusingmessagingonthepositiveimpactofthetoolsforeachemployeewhileunderscoringthatthetoolsdonotunderminetheirworkandvalue.

4.Reliability:WhenimplementingAItoolsforcustomers,retailersshouldbeclearonwhattheycanexpectandthelimitationsoftheinteractions.Forexample,ifthebotscannotprovideaparticulartypeofsupport,retailerscouldtriageaccordinglyforcustomersupfront.Doingsowillultimatelydriveperceptionsofreliability.

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

Conclusion

Asretailerslooktowooprice-sensitive

consumersin2024,loyaltywillhaveto

beearned.Tomakethathappen,trust

willneedtobethecornerstoneoftheir

profitabilityplaybook.

10

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

Forecast

Appendix

Figure1:GDPversusconsumerspendinggrowth%

10

8

6

4

2

0

-2

-4

Baselinescenario

History

201720182019202020212022202320242025202620272028

RealGDPRealconsumerspending

Note:ForecastsarebyDeloitte’sUSEconomicsteam.

Source:UnitedStatesBureauofEconomicAnalysis(sourcedusingHaverAnalytics);Deloitteanalysis.

Table1:Metricsdeterminingoutperformersandunderperformers

FY2020–22median

Outperformers

Middleoftheroad

Underperformers

Overall

Returnonassets(ROA)

16.2%

10.2%

3.8%

11.6%

Totaldebt-to-EBITDA

1.8x

2.2x

4.5x

2.2x

Notes:Deloitteanalysisof39leadingUS-basedretailers.Three-yearaveragesareusedtosummarizecompany-levelperformancesover

FY2020–22.Thetablerepresentsthemedianvaluesacrosscompaniesineachgroup.OutperformershadROAof11.6%ormoreandDebt-

to-EBITDAof2.2xorless,whileunderperformershadROAlessthan11.6%andDebt-to-EBITDAexceeding2.2xoverFY2020–22.

Source:S&PCapitalIQ

Table2:Profitablegrowth

FY2020–22median

Outperformers

Middleoftheroad

Underperformers

Overall

RevenueCAGR

10.7%

6.3%

2.7%

7.5%

EBITmargin

10.8%

7.5%

2.5%

6.0%

Netmargin

7.8%

5.3%

0.2%

4.0%

Totalassetsturnover

1.8x

1.3x

1.5x

1.5x

Returnoninvestedcapital(ROIC)

12.8%

8.3%

-1.5%

8.3%

FY2023–25median

RevenueCAGR

3.1%

4.0%

0.7%

3.1%

EBITmargin

10.9%

6.6%

3.4%

5.9%

Netmargin

8.3%

4.8%

2.2%

3.9%

Notes:Deloitteanalysisof39leadingUS-basedretailers.Three-yearaveragesareusedtosummarizecompany-levelperformances

11

overFY2020–22formetricsotherthanrevenue.EstimatedmetricsforFY2023–25arecalculatedbasedonconsensusanalystestimates

sourcedfromS&PCapitalIQasofDecember8,2023.Thetablerepresentsthemedianvaluesacrosscompaniesineachgroup.

Source:S&PCapitalIQ

12

Tailwinds

2024USretailindustryoutlook|Lookingforloyaltyinalltherightplaces

Table3:Balancingdebtandgrowthambitions

FY2020–22median

Outperformers

Middleoftheroad

Underperformers

Overall

RevenueCAGR

10.7%

6.3%

2.7%

7.5%

Capitalexpenditure

%ofrevenue

2.0%

3.4%

2.2%

2.3%

TotalassetsCAGR

5.1%

6.3%

2.5%

4.1%

Totaldebt