Cyber Monday sales may top $12 billion but bargain-hunting will clip retail sector profits

Updated at 8:02 AM EST

Americans are expected to spend billions on Cyber Monday sales, according to Adobe Analytics, following on from record online spending on Black Friday, but retailers will need to extend their heavy holiday-season discounts in order to win cash-strapped shoppers.

Adobe Analytics, which tracks online spending trends through data collected from its Adobe Experience Cloud service, predicts online spending for Cyber Monday will rise around 5.4% from last year to $12 billion, adding to the $10 billion spent over the holiday weekend and the record $9.8 billion Black Friday splurge. 

Overall sales for 'Cyber Week', which includes the five days beginning on Thanksgiving, were up 5.4% from last year to $37.2 billion, Adobe estimated. 

“The decline in online prices over the last year has created a favorable environment for consumers with strong discounts this season that are tempting even the most price conscious consumers," said Vivek Pandya, lead analyst, Adobe Digital Insights.

Perhaps reflecting hybrid and 'work-from-home' dynamics, or a younger consumer demographic, Adobe said its expects Cyber Monday sales made through mobile devices to exceed orders from desktop computers for the first time on record.

Mastercard SpendingPulse, meanwhile, estimated that overall Black Friday sales rose 2.5% from last year, paced by an 8.5% increase in e-commerce sales. In-store transaction, Mastercard said, were only up 1.1%. 

“Consumers are navigating the holiday season well and taking advantage of holiday promotions, giving them ample choice as they hunt for gifts for everyone on their list,” said Mastercard senior advisor Steve Sadove. “Consumers are also shopping smarter, using all of their tools – from searching across channels to cross checking on apps and websites – to maximize value while they spend time with friends and family.”

Related: Retail sales slow, but top Wall Street forecasts, as inflation pressures ease

The overall spending backdrop, however, suggests added pressure on retail profit margins for this year's holiday season as consumers grow more cautious on the state of the broader economy, run-down their pandemic era savings and continue to feel pinched from high inflation and the resumption of student loan payments.

The University of Michigan's closely-tracked consumer sentiment index, published last week, showed inflation expectations rising for a second consecutive month in November, while overall optimism slumped for a fourth straight month. 

Walmart  (WMT) - Get Free Report, the world's biggest retailer, highlighted cautious consumer spending trends in its third quarter earnings report earlier this month, noting "somewhat uneven" sales 

"We're seeing credit tightening, we've seen consumer balance sheets that are getting back close to pre-pandemic levels. You've got the repayment of student loans which affects about 27 million Americans," said Walmart CFO John David Rainey.  

"There's a number of different reasons, we can't put our finger on it exactly. And so, that's why we take a little bit more of a cautious stance as we go into the fourth quarter," he told investors on a November 16 conference call. 

Target  (TGT) - Get Free Report CEO Brian Cornell also citing the impact of both high energy prices and overall inflation levels, noting that "it all puts pressure on discretionary spending."

"On the top line, our expectations reflect our continued near-term caution, leading us to maintain our prior guidance for a mid-single-digit decline in Q4 comparable sales," he told investors on November 15.  "On the bottom line, we're also maintaining a cautious posture, particularly because the fourth quarter is typically a very promotional season."

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