Holiday Restocking 2025:

Inventory Ratios, Demand Signals, and the Lunar New Year Effect

By Ken O’Brien, President & CEO, Gemini Shippers Association

The economic environment remains marked by uncertainty. Inflationary pressures have moderated but continue to weigh on discretionary spending for certain consumer segments, while others remain resilient. This uneven landscape is evident in how companies are approaching inventory commitments for the holidays.

The inventories-to-sales ratio provides a telling signal. According to Federal Reserve Economic Data (FRED), the retail sector’s ratio in July 2025 stood at 1.24, indicating inventories represented just over a month of sales.

Broader manufacturing and trade data show a ratio of 1.37, suggesting supply chains are holding modest buffers but still less than in pre-pandemic years. Retailers appear cautious, maintaining coverage without moving aggressively to build inventory ahead of peak demand.

Against this cautious stance, the holiday season looms as a potential pivot point. Holiday forecasts often serve as early indicators for broader retail momentum, and sales performance in November and December can set the tone for inventory planning well into the first quarter of the following year. Retail sales are expected to grow between 2.7% and 3.7% in 2025, which is a slower rate than in 2024. Economists cite cooling labor markets, tariffs, and policy uncertainty as factors influencing this moderation. Many consumers will be more selective with their spending. A PwC survey found that 53% of consumers believe that overall price increases will affect their holiday spending decisions.

If consumer demand proves strong, the current restraint in inventory positioning could quickly give way to restocking pressures. Retailers that chose to hold back may find themselves racing to replenish in December, creating capacity and availability challenges across supply chains. Conversely, if holiday demand falters, the discipline shown in limiting inventory could help avoid the overhang that has challenged the industry in past cycles.

The calendar brings an additional complexity. In 2026, Lunar New Year will fall on February 17, which is later than usual. On average, the holiday has fallen in the first week of February, and the last time the holiday was this late was 2018 and 2015. For global supply chains, this timing has meaningful implications. Factory slowdowns in China and across Asia typically begin weeks before the holiday, with production and logistics ramping back up only gradually afterward.

A later Lunar New Year increases the timeline for restocking in early 2026. Retailers relying heavily on Asian sourcing will face a wider window to secure product flow before factories shutter, and those counting on January replenishment may find themselves exposed. The industry has experienced these effects before, but the alignment with a potentially strong holiday season creates added tension: higher-than-expected holiday demand could collide with limited capacity to restock in the immediate post-holiday period.

This creates a delicate risk balance. The prevailing sentiment in the market leans toward restraint, a rational response to uncertain consumer outlooks. Yet history shows that holiday periods can surprise on the upside, and when they do, inventory shortfalls are magnified by constrained logistics capacity.

The inventories-to-sales ratio provides a useful lens here. At current levels, retailers are positioned with some flexibility, but not with excess. If demand accelerates, ratios could compress quickly, signaling inventory drawdowns that ripple upstream into manufacturing and transportation. If demand softens, ratios may remain stable, validating the cautious approach.

The outcome of the 2025 holiday season will set the stage for supply chain leaders in 2026. Strong consumerism could tighten supply lines and drive elevated freight demand. A softer season, by contrast, could reinforce conservative inventory postures and delay broader restocking into spring.

Either way, the coming months will test the balance between discipline and responsiveness in retail supply chains. With inventories more closely aligned to sales than at any time in recent years, the margin for error is thin.

The 2025 holiday season stands as a defining test of inventory strategies that have shifted from pandemic-era overcorrection to a more measured equilibrium. The interplay of consumer demand, inventory ratios, and global production calendars will shape how the industry enters 2026.

For retailers, the question is less about a single forecast and more about readiness for whichever scenario emerges. Whether demand surprises to the upside or caution proves warranted, the supply chain’s ability to absorb and adapt will be the critical factor in sustaining momentum.