2025 Holiday Sales Expose Deepening Economic Divide
Los Angeles, Tuesday, 23 December 2025.
The 2025 holiday season confirms a “K-shaped” economy: Ralph Lauren shares surged 37% on luxury demand, while Kroger dipped 13%, illustrating a historic divide between affluent and budget-conscious consumers.
A Tale of Two Incomes
As of December 23, 2025, economic data underscores a widening chasm between American households. A Bank of America report released this month indicates that after-tax wages for higher-income employees grew by 4% year-over-year, significantly outpacing the 1.4% rise seen by lower-income groups [1]. This disparity has directly translated into consumption patterns; higher-income households increased their spending by 2.6% compared to the previous year, while lower-income groups managed only a 0.6% increase [1]. The divergence is visible in real-time purchasing behavior, with affluent shoppers flocking to luxury retailers like Ralph Lauren for high-ticket items, while budget-conscious consumers at grocery chains like Ralphs focus intensely on discounts and essentials [1].
The Retail Split: Luxury vs. Survival
The 2025 holiday shopping season has been defined by a strategic retreat from the middle market. Luxury brand Frette recorded its best Black Friday in history, driven by a demographic where 3% of Americans now account for 25% of all spending [5]. Conversely, sales of budget staples like Hamburger Helper have doubled this year, signaling a shift toward survival spending for many families [5]. Retail experts now advise brands to target either premium or value positions, as the middle ground erodes [5]. This trend is exemplified by the stock market performance of major players over the last six months: Ralph Lauren shares have climbed 37%, whereas Kroger has seen its value decline by 13% as it contends with price-sensitive shoppers [1].
Labor Market Instability
Underlying these consumption trends is a fractured labor market. In November 2025, data from ADP revealed a loss of 32,000 U.S. jobs, a sharp reversal from gains in October [3]. The burden of this downturn fell disproportionately on smaller enterprises; firms employing between 1 and 49 workers laid off 120,000 employees, highlighting the specific vulnerabilities of small businesses in the current economic climate [3]. While sectors like healthcare and data center construction remain robust—driven by massive investment in artificial intelligence infrastructure—manufacturing and construction have seen little to no growth [3]. This uneven employment landscape reinforces the ‘K-shaped’ trajectory, where professional sectors thrive while traditional labor markets contract.
Hospitality as a Bellwether
The restaurant industry serves as a critical indicator of this economic bifurcation. In Kansas City, a wave of closures has hit legacy establishments, including the Corvino Supper Club and D’Bronx, the latter shuttering after 35 years [7]. Data suggests that dining out is increasingly becoming a luxury activity; approximately $6 out of every $10 spent in restaurants now comes from households earning over $100,000 annually [7]. Meanwhile, 68% of consumers report “trading down” from restaurant meals to cooking at home, and 44% of lower-income Americans state they are eating out less frequently than in 2024 [7]. With beef prices rising nearly 15% over the past year, the pressure on both operators and average consumers continues to mount [7].
Summary
The 2025 holiday season offers a definitive snapshot of a K-shaped economy where fortunes have sharply diverged. While the top tier of earners enjoys wage growth and asset appreciation, driving record luxury sales [1][5], the broader population faces a reality of job insecurity and strict budget management [3][7]. As 2026 approaches, the decoupling of luxury performance from essential retail suggests that the economic stability of the coming year will depend heavily on which side of the ‘K’ a household occupies.