Retailers went into Black Friday weekend with low expectations and came out with a sense of relief. The traffic arrived, thanks to unprecedented markdowns that will take a big bite out of fourth-quarter profits.
Outlets and discounters, which staged the biggest bargains on designer clothes and electronics, were busiest, though executives from department stores and specialty chains contacted Sunday said they were also pleased by the turnout.
“Some of us were wondering whether shoppers would come out at all,” said one retail chief executive who requested anonymity.
“Black Friday is still one of the biggest days of the year,” said Terry Lundgren, chairman, president and chief executive officer of Macy’s Inc. It’s typically the second largest volume day of the year, eclipsed only by the Saturday before Christmas, he noted.
“I went to lots of stores and there was clearly a lot of traffic in malls and outlet centers,” said Steven I. Sadove, Saks Fifth Avenue’s chairman and ceo. “Customers were shopping for deals. If you had sharp price points, you were seeing volume.”
More than 172 million shoppers visited stores and Web sites over Black Friday weekend, up from 147 million shoppers last year, according to the National Retail Federation’s 2008 Black Friday Weekend survey of 3,370 consumers, conducted by BIGresearch. Shoppers spent an average of $372.57 last weekend, up 7.2 percent over last year’s $347.55. Total spending reached an estimated $41 billion. The survey was conducted Nov. 27 to 29.
“Pent-up demand on electronics and clothing, plus unparalleled bargains on this season’s hottest items helped drive shopping all weekend,” said NRF president and ceo Tracy Mullin.
However, she warned that, in light of the recession, “holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again.” Declining gas prices didn’t hurt either.
Retailers remain desperate to move inventories that are outsized in proportion to demand, and some expect consumers to take a breather after last weekend, leading to a lull in shopping that could last until a week or two before Christmas. They are also concerned about declining tourism, particularly affecting big flagship stores in gateway cities.
Further bad news is expected to arrive on Thursday, when major retailers report November comparable-store sales. Comparisons to last year won’t be pretty because stores were handicapped by Thanksgiving falling five days later this year than last, meaning there were fewer big shopping days in November. However, the shortfall could be made up in December and retailers warn not to read too much into the November results. A truer read of the season would come from examining the combined sales of both months.
Further scars on the season occurred Friday at a Wal-Mart in Valley Stream, N.Y., and at a Toys ‘R’ Us in Palm Desert, Calif. At the Wal-Mart, a stampede of bargain hunters at the opening resulted in the death of one store worker who was trampled. No arrests have been made yet, and store videos are being reviewed. Amid the chaotic crowd, it could be tough to determine who is to blame, although the incident set off a flurry of criticism of both Wal-Mart’s alleged lack of adequate security personnel and the inhumane crowd desperate for a bargain. A column in Sunday’s New York Times labeled the incident Wal-Mart’s “Guernica” after Picasso’s famous painting.
Hank Mullany, senior vice president and president of the Northeast division of Wal-Mart U.S., said on Friday, “We expected a large crowd this morning and added additional internal security, additional third-party security, additional store associates and we worked closely with the Nassau County Police. We also erected barricades. Despite all of our precautions, this unfortunate event occurred.”
He added, “Our thoughts and prayers go out to the family of the deceased. We are continuing to work closely with local law enforcement and we are reaching out to those involved.”
At the Toys ‘R’ Us, two men were shot and killed inside the store. Police were continuing to investigate, according to reports.
Retailers reacted to the Wal-Mart incident by saying it could lead to changes in security and crowd control in response to doorbusters, and to tempering the character of the early-bird offerings which can create a climate of frenzy over limited offerings. The New York Times reported Saturday that fights and injuries occurred at other Wal-Marts around the country.
A crowd of about 5,000 stormed Macy’s Herald Square on Friday at the 5 a.m. opening, when 200 doorbusters compared with last year’s 20 were offered. There were no incidents. Lundgren was on the scene and concluded, “There was some pent-up demand,” as he watched the traffic. Before Thanksgiving, Macy’s and other stores offered sharp markdowns, but Lundgren said the pre-holiday promoting wasn’t particularly effective. It took the allure of Black Friday and the promise of even better deals — plus a long holiday weekend — to get consumers to shop.
To cope with what retailers are calling their toughest season ever, the key strategy is to mark down fast and furiously, in many cases 50 to 75 percent off, as steep as discounts would normally be after Christmas. One principal said, for example, that with a turtleneck, regularly priced at $50, it’s better to mark it down to $29.99 right away, and maybe sell out, than mark it down to $39.99, sell some and need to mark it down again later. Stores must clear inventories to make room for spring goods which start arriving in mid- to late January. If the fall goods aren’t cleared in the stores or outlets, the merchandise gets sold to jobbers for a tiny fraction of its cost.
“If you take the markdowns now and move the inventory, you will get through this and come out stronger later,” Lundgren said. Asked about the impact on profits, Lundgren replied, “Of course, it will take a bite out. We have already forecasted profits down.”
“You need to make sure you get through your inventory over the next four or five weeks,” explained Brendan Hoffman, ceo of Lord & Taylor. “We’re in relatively good shape with the sales per stock trend. With all of the uncertainty, the need to work down inventories is even more important this year. A markdown you take today is cheaper than a markdown you will take later.”
Traffic at L&T “really built as the day went on,” Hoffman said. “It certainly exceeded our very conservative expectations, but it came at a price. We made sure our prices were very sharp. Overall, the customer was definitely out there shopping.”
By Saturday, store traffic was already subsiding across the country, but the NRF said it was still better than the Saturday after Thanksgiving a year ago. As expected, many shoppers purchased clothing and accessories over the weekend, while also popular in descending order were books, DVDs, CDs and video games and consumer electronics. Toys were also big sellers, though gift cards dropped 10 percent against last year. NRF continues to project that holiday sales will rise 2.2 percent this year to $470.4 billion.
Here, a look at the weekend by retail channel:
At Bloomingdale’s, “The customer found great value,” said Michael Gould, chairman and ceo. “For soft goods, it was the best week of the fall season so far,” a result of the values offered, as well as “pushing newness and fresh receipts.” Contemporary men’s and women’s sportswear were very strong categories over the weekend, he added.
Steve Pernotto, executive vice president, Belk Stores, said Black Friday business “didn’t meet our overall expectations, but we were encouraged by the outcome. We noticed we were selling the same number of items in the morning, but at a lower average retail price. In the early afternoon, the trend changed and overall sales were much stronger than last year.” The lowest-priced items weren’t necessarily bestsellers. Shoes, fashion accessories, men’s and women’s sweaters, denim and electronic gadgets sold well.
J.C. Penney said Black Friday shopping was strong across all areas of the country with customers responding well to the gift assortments and value. Some bestsellers were the “red box gifts” including the Marshmallow Popper, USB turntable, Razor Ripstik, MP3 players and Einstein Hand Held Games. “Practical” gifts, such as sweaters, boots, wool coats, luggage, denim, small electronics and cookware, as well as junior and young men’s apparel, and fine jewelry also sold well.
Lord & Taylor said shoes, handbags, coats, cosmetics and men’s classifications, as well as Uggs were hits. However, according to one executive from a different department store, “There were no big mind blowers.”
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