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The scorecard is in: Retailing had far more losers than winners during holiday 2013.
This story first appeared in the January 8, 2014 issue of WWD. Subscribe Today.
For those that performed OK, it amounted to having the right merchandise at discounted prices, industrial-strength promoting to get lazy consumers shopping, riding some third-quarter momentum and, of course, having a smooth-operating Web site to compensate for the nation’s anemic mall traffic.
In some cases, even the Internet fell short, as comScore on Tuesday reported shopping via desktop computers (mobile not included) in November and December amounted to $46.5 billion, up 10 percent from the same time span in 2102 but below comScore’s forecast for 14 percent growth.
Department stores transcended the lackluster trends, with Macy’s and Nordstrom drawing crowds and J.C. Penney getting its promo-mojo back and recovering some shoppers who a year ago defected to competitors.
In the specialty arena, Victoria’s Secret, Kate Spade, Michael Kors, Tory Burch, Rag & Bone, Ann Inc. and Urban Outfitters were strong, according to analysts and retail consultants.
Gap Inc., in the midst of a multiyear turnaround, held its own. Thomson Reuters estimated Gap same-store sales rose 1.5 percent in December.
Crate & Barrel and Sur La Table got a boost from the rebounding home sector, which also helped multicategory department stores.
There was just one must-have item of the season — the Sony PlayStation 4. “Nothing could touch it” in terms of demand, said Craig Johnson, president of Customer Growth Partners. Not even the XBox One, another big seller.
Among retailers, “Number one in the mall was Apple,” said retail analyst Walter Loeb. “Everybody bought tablets and iPhones and didn’t have money to spend on fashion.”
Nevertheless, Loeb said Nordstrom did well despite not opening on Thanksgiving, unlike many rival retailers. “Amazon did well too,” Loeb said. “The delivery problems [where Christmas gifts came late] shows they had a lot of business.…The comeback kid is J.C. Penney. I don’t know how well they did, but they certainly did better than last year.”
“Victoria’s Secret had something up their sleeve,” said retail analyst Jennifer Black. “They did a better job with beauty sets and packaging; the gift sets came in cute sequin bags, and there was the right amount of novelty in bras and panties. The whole aesthetic was more enticing. I saw a lot of people shopping beauty. They promoted, constantly at 30 percent, and did what they needed to do to drive traffic.”
Black commended Kate Spade for “great product and a well-thought-out promotional plan — both in-store and online. The holiday 2013 glitter collection was a home run.”
At Ann Inc., operator of Ann Taylor and Loft, “We loved the holiday merchandise at both divisions,” Black said. “I think both divisions did really well.”
New opportunities at Nordstrom to accumulate loyalty points drew shoppers, while Macy’s was positively impacted by the increase in the number of stores fulfilling orders from customers, from 292 in 2012 to 500 in 2013. The newly renovated main and second floors at the Herald Square flagship, the launch of Finish Line and Lids licensed shops, and bolstering merchandise targeted to Millennials were factors contributing to an upbeat season at Macy’s. One source said Macy’s is considering breaking from its recent policy of not reporting monthly sales, to fill analysts and investors in on its December performance.
In outerwear, Ugg and The North Face reportedly did well, fueled by a colder season and quality product.
Several luxury brands were lifted by the soaring stock market. Chanel, for example, was said to be a strong performer, and maintained its full-price posture. So were Prada, Hermès and Brunello Cucinelli, among others.
On the other end of the price spectrum, TJ Maxx scored high abetted by its loyal following and sharp discounts of top labels. However, the word on the street is that budget-priced stores, including Wal-Mart and Old Navy, didn’t fare as well as hoped, with traffic down and shopping happening later and later in the season.
“We all know that traffic across the board was weak. So I don’t think there were a lot of standout winners,” said Rebecca Duval, analyst at BlueFin Research Partners. “Retailers with stronger e-commerce businesses were the winners. For Urban Outfitters, that’s such a large part of the revenue. Macy’s did well too. J.C. Penney had a pretty decent performance. There’s been a resurgence at department stores.”
Among specialties, “Gap held its own, and Loft did particularly well. Year-to-year comparisons are easier, but mainly there’s been a huge improvement in the product at Loft,” Duval said.
On the losing side, Target, which just before Christmas had announced it was having a good season, lost additional shoppers as news broke of a security breach involving stolen credit card information. Then there were technical problems redeeming gift cards as well.
Sears Holdings, where sales have fallen for 27 straight quarters, continues to lose ground by not investing in the stores. “Sears is a real loser. It’s the easiest call I have,” said Loeb.
He also suggested Saks Fifth Avenue could have experienced a tough season due to ownership and leadership changes. “Spirits were down at the store,” Loeb said, adding that some branches are wanting for the right products.
The teen sector continued to be soft, impacted by juniors opting for electronics and smartphones over fashion. “Abercrombie & Fitch did not have a good holiday, but they are doing better in a bad season. A&F is a big recipient of gift cards from kids getting them from their parents and grandparents,” Johnson said.
Aéropostale is still hurting for business, but there’s a ray of light following a string of recent launches, such as the Bethany Mota and Live Love Dream, as well as this month’s launch of the Pretty Little Liars collection. The additions are attracting teens to the stores, which should expose them to Aéropostale’s core collection, which was revamped last year with greater details and less-prominent logos. At this point, sales conversion rates remain insufficient.
In fast fashion, Forever 21 and H&M are “under substantial pressures.” Forever 21, once among the hottest apparel retailers, is confronting issues surrounding oversize stores where it’s hard to maintain productivity.
The complete picture on retail’s winners and losers in holiday 2013 won’t emerge until retailers report fourth-quarter earnings beginning in February. December sales get released Thursday, though they don’t tell the margin story and the number of retailers reporting monthly has been shrinking drastically. Still, despite lacking the hard data, retail analysts and consultants already have a pretty good handle on the season’s outcome.
“There were not too many winners,” Loeb said. “Most retailers were bent on at least beating last year. I don’t think anybody really beat plan. A lot of people took heavy markdowns post-Christmas to reduce inventory so it was on plan by the end of the quarter. The frigid weather and freezing rain makes it more difficult.”
Gian Fulgoni, chairman of comScore, characterized it as an unusual season. “Many consumers continue to be challenged economically, which forced retailers to offer large price discounts in an attempt to stimulate demand,” he said. “Unfortunately, this also had the effect of reducing total dollar sales since consumers could buy more for less.”