Retailers emerged from the four-day Thanksgiving stretch feeling OK, revenue-wise. Yet any gains seen weren’t enough to ease concerns about profit margins — nor how the season will play out come Dec. 25.
This story first appeared in the December 1, 2014 issue of WWD. Subscribe Today.
It’s likely stores made their numbers for November overall. They did it with heavy-duty promoting that began earlier than ever, extended hours, strong online activity, cold and clear weather last week and consumers shopping as much for themselves as for gifts, if not more so. There was no shortage of creative promotions with plenty of freebees: free Uber car rides to the shopping center, free shipping, free books with a big enough transaction and guarantees on getting deeply discounted items, provided shoppers brought in a printout of the offering.
For the Thanksgiving four-day blitz, outerwear, boots, luggage and TVs — which all tend to be self-purchases — were among the top sellers. On the gifting side, housewares like blenders, crock pots and coffee makers; headphones; mobile devices and mobile accessories like chargers; video games; cashmere sweaters; athleticwear, and hoodies did well. Apparel was lackluster — continuing the trend of the last few holiday periods — with accessories outperforming.
Retail executives and analysts said business started to simmer down by Friday evening, that Saturday was nothing to write home about, and that after all the coupon-cutting, doorbusters and early-birds already unleashed, expectations for Cyber Monday and the first week of December at brick and mortar are muted. They’re hoping a late Hanukkah; an extra day on the calendar; easy comparisons compared with last year’s tepid results, which were impacted by severe weather on two key weekends; lower gas prices, and consumers still with lots left on their gift lists give them a fighting chance of meeting their goals.
This week won’t do much to sway any uncertainty, as the next several days will be subdued in comparison to last week and soft compared with the week before Christmas, retailers said. Nevertheless, they regard this week as among the bigger volume periods of the year.
“We would expect that after Cyber Monday, the first week of December could be soft but we planned it appropriately,” said David Zant, the president of Belk Inc. “Once you get into the second and third weeks, velocity will pick up substantially. The first week of December is still significant relative to other times of the year. Every week, the volume grows in December.”
ComScore reported U.S. desktop e-commerce spending from Nov. 1 to 28 reached $22.7 billion, marking a 15 percent increase versus the corresponding days last year. Yet Cyber Monday won’t be a record-breaker, given all the deals that have been online for weeks already.
According to the National Retail Federation, 126.9 million shoppers plan to shop Cyber Monday, down slightly from the 131.6 million who planned to participate last year. “Retailers will still offer unique deals exclusive to Cyber Monday, but consumers also know shopping on Cyber Monday won’t be their last chance to find low prices and exclusive promotions,” said NRF president and chief executive officer Matthew Shay.
NRF’s modest Cyber Monday expectations are based on a survey by Prosper Insights & Analytics over the weekend of 4,631 consumers. NRF is forecasting a 4.1 percent increase in holiday sales this year, though some retailers and forecasters see the retail business at least a point or two below that.
GIFT-SHOPPING VERSUS SELF-PURCHASING
This will also be a week where retailers double up efforts to spur sales of gift items, as opposed to products that people buy for themselves, and also bank more on resortwear, where they have a better chance at selling at full-price and offsetting the margin erosion seen from slashing prices on fall and winter merchandise.
Regarding the last four days, “It wasn’t terrible,” Kathryn Bufano, the chairman and ceo of Bon-Ton Stores Inc., said Sunday. Some stores drew lines of people waiting for deals at 6 p.m. Thanksgiving Day, when the doors at many retailers swung open, Bon-Ton included, though as Bufano observed, “There weren’t the mob scenes like last year.”
At Bloomingdale’s, “There was healthy traffic through most of the weekend. Cold weather categories did best. We continue to feel good about the overall holiday season,” said Tony Spring, chairman and ceo.
Liz Rodbell, president of Lord & Taylor and Hudson’s Bay, said, “We had a positive performance for sure.” Rodbell said she was pleased with the level of traffic from Thanksgiving through Saturday and she remains “cautiously optimistic” about the season. “The weekend before Christmas will certainly be strong. E-commerce traffic was quite strong. Mobile traffic continues to evolve and grow. Now we move right into Cyber Monday. It happens quickly,” she said.
“In general, this seems to be a very aggressive season from a promotional perspective,” said Andrea Dorigo, president of Brooks Brothers. “Retailers are discounting more and earlier than before and this has diluted the spike we have traditionally seen on big days like Black Friday. Customers were definitely shopping for bargains. We made the decision to stay consistent with our promotional strategy of previous years. We tweaked things here and there, but overall did not increase our promotional activity significantly. We believe that long-term, this is the right choice for our brand and for our customers.”
“We had strong double-digit growth on comps,” said Kevin McLaughlin, cofounder and creative director at J.McLaughlin. “That being said, I’m kind of ambivalent about it. We did promote a bit. That’s not traditionally something we do. Frankly, I was nervous,” that with most retailers aggressively promoting, he’d get stuck with too much merchandise. J.McLaughlin staged a four-day “thank-you” event for its customers, which gave an additional 30 percent off merchandise already marked down 20 percent.
McLaughlin said his pricing approach remains balanced, with a promotional side and a full-price side for new resortwear. He cited embroidered shorts and bright cashmere sweaters as some of the best-sellers so far for resort. “You have to have the right blend between cold-weather appropriate gifts, like ski sweaters, with the appropriate amount of resortwear, like a men’s polo shirt or ladies sarong,” McLaughlin said. “That dance is important. People aren’t giving skirts, blouses or trousers as gifts.”
At Von Maur, a midtier chain of 30 department stores based in Davenport, Iowa, “Our Black Friday was much stronger than we anticipated,” said Melody Wright, chief operating officer. Before, business was a “mixed bag” from month to month. “We feel really good about how things are shaping up for the holiday season.”
Von Maur’s bestsellers included North Face fleece jackets and Under Armour hoodies, all priced about 25 percent less. “These basic stock items are not normally marked down, so when you see that, it’s a big deal,” Wright observed. “That generated some big volume.” Activewear overall checked exceptionally well, in addition to women’s accessories and fashion and winter boots across the board.
Marc Rosen, executive vice president of Levi Strauss & Co. and president of global e-commerce for the company, said on Black Friday, “Our U.S. store retail traffic was up slightly, which we haven’t seen over the past two years. We are also encouraged to see consumers spending more on every visit to our site. While we still have a few key weeks to go in this shopping season, so far, so good.”
ACCELERATING THE MARKDOWNS
At the mass level, Target Corp. said its offer of free shipping on target.com drove record sales. “I’m encouraged by early results,” Brian Cornell, chairman and ceo, said Friday.
Target was among the many chains accelerating its markdowns, for the first time offering a pre-sale of Black Friday deals online and in stores on Wednesday. By 9 a.m., online sales exceeded total sales from the same day last year, Target said. Top items online included the iPad Air 2 and Beats by Dre Solo HD headphones. Yet Thursday was Target’s biggest volume day online, with plenty of doorbusters offered. Target will have more than 100,000 items on sale online through Dec. 6.
Tablets, televisions, sheets, children’s apparel and video gaming led the way at Wal-Mart Stores Inc. on Thursday, when stores opened at 6 p.m. Wal-Mart cited lines for tablets and TVs snaking through stores. The retailer offered a one-hour guarantee for certain advertised products from 6 to 7 p.m. on Thanksgiving. Shoppers were required to bring printouts of the coupon for the guarantee, but there were complaints on social media that the coupon page was missing.
Wal-Mart kept almost every cash register open during the weekend’s big events. The retailer said 22 million shoppers visited its 1,600 stores in the U.S. The retailer’s Black Friday ad was downloaded by more than 25 million people and shoppers started downloading their local store maps during the afternoon of Thanksgiving Day. With plenty of online deals, Thursday proved to be Wal-Mart’s second-highest online sales day ever, topped only by Cyber Monday in 2013.
While retailers appeared to be promoting with greater intensity, one ceo said: “It just seems that way due to the nature of all the e-mails and social media. Digital communication tools mean people are more hyper-aware of the values. It’s very aggressive promotionally but net-net, it’s similar to years past.”
“I can’t imagine when Christmas wasn’t promotional, but now you do have different ways of communicating. You see the message a lot more,” Bufano said.
Retailers and mall operators on the West Coast, while positive about the start to the holidays, see a rugged stretch in December.
“What’s new to us is how important November has become and that has a lot to do with e-commerce,” said Doug Wood, president and ceo of Tommy Bahama. “Between Black Friday and Cyber Monday, I do believe that you have a segment of the population that looks at this as a national shopping week.…It still doesn’t outweigh how important December is to us.”
Hot items for Tommy Bahama included a women’s cashmere sweater coat, retailing for $298, and a men’s reversible half-zip sweater, selling for $98. Discount cards went out to customers at the start of November, several weeks earlier than in previous years. Shoppers who spent at least $150 received a $50 discount card to use in January. That’s lowered from the $200 minimum spend required last year to receive the discount.
Black Friday sales and promotions at Pacific Sunwear of California Inc. tracked about on par with last year, according to president and ceo Gary Schoenfeld. Joggers for men and women, long-sleeve knits and wovens in cold-weather markets were bestsellers.
DISCOUNTING CRITICAL TO TRAFFIC
Susan Vance, director of marketing and sponsorship at the Beverly Center in Los Angeles, said Friday that foot traffic was flat to up slightly from last year. “We really have a customer that is focused on the right item,” Vance said. “They shop a lot for themselves so they’re looking for quality of merchandise and on-trend merchandise, and quite often that’s not on sale.” Macy’s, Michael Kors, Bebe, Guess, Victoria’s Secret, Steve Madden and Forever 21 saw heavy traffic at the Beverly Center.
At South Coast Plaza in Costa Mesa, Calif., Sears, Macy’s, Microsoft and Sony drew big crowds. Debra Gunn Downing, the mall’s executive director of marketing, said the center was set to meet its projection of more than 410,000 people for the Thursday through Sunday weekend, about 10 percent higher than last year.
“You see a lot more people because of the promotions or some sort of discounted offering, but our luxury stores were having a good day,” Downing said. “What you have is certainly the customer looking for the special deals and promotions, but you also have a luxury shopper that comes out today [Black Friday] as part of the tradition and part of the social component of the day.”
“We found that definitely Thanksgiving was a family affair. They enjoyed their Thanksgiving meal and then came out shopping, whereas the Friday shoppers were still families, but definitely a lot of independent, bargain hunters,” said Shaun Swanger, vice president of marketing for Westfield. Microsoft stores did exceptionally well, Swanger said, along with Charlotte Russe, Hollister and Abercrombie & Fitch.
Caruso Affiliated reported Saturday about 1,800 Uber rides to its The Grove and The Americana at Brand shopping centers. The rides were part of a promotion beginning Black Friday, offering shoppers a free UberBlack ride to either center. “We honestly didn’t know what to expect,” said executive vice president of operations Jackie Levy. “It’s the first time any shopping center has done a promotion like this with Uber. We’re very pleased with the results.” Nordstrom, Diane von Furstenberg and Michael Kors reported double-digit growth, according to Levy.
Bob Mitchell, co-president of Mitchells Family of Stores, said, “Friday was a strong day in terms of traffic and sales. Saturday was not as strong, but we had a nice single-digit increase for the two days.”
Mitchell said the business centered less around gift-giving than people shopping for themselves, evidenced by men’s tailored clothing (not exactly a stocking stuffer) performing well, particularly slim-fitting suits and jackets. “Nothing was on sale,” he added. “It was just good clients buying. We got a lot of comments about how the chains were on sale, but we were able to service our clients without cutting price, although our women’s designer sale does break this week.”
Mitchell said its Wilkes Bashford division in California performed as well as its East Coast cousins, Mitchells, Richards and Marshs. “Up until now, the West Coast was stronger, but we’re seeing renewed optimism on the East Coast,” he said. “For the first time since 2007, we’ve had three months in a row with solid single-digit increases. This consistent moderate growth is encouraging. If December is the same, it’ll be a happy holiday for the Mitchells Family of Stores.”
Ken Giddon, owner of Rothmans men’s stores on Union Square in Manhattan and Scarsdale, N.Y., said business has been good, “but Black Friday is not a men’s specialty store day. I get tourists, but not my regular customers. They think it’s just too crowded.” Giddon said sales last weekend were “about the same as last year,” with Saturday better than Friday and better than last year.
Rothmans ran a few Black Friday promotions, at 20 percent, rather than the 40 to 50 percent off or more at bigger stores. “The nature of a specialty store is the customer is looking for special merchandise, not special pricing. We’re just trying to hold our ground.”
Giddon said the top seller over the weekend was outerwear. “People were reading their Farmer’s Almanacs and they’re expecting a cold winter after last year,” he said. In addition, Vince product was “moving well,” and Gant was also strong. A women’s pop-up from Olive & Bette’s that opened a few weeks ago is also a strong draw, he said. “We might make it permanent,” he said.
Regarding the season overall, “With people saving money on gas, the macro picture is good. For specialty stores, it won’t be record-breaking, but it should be better than average,” said Giddon.
DATA DISCLOSES DECLINES
Research statistics weren’t nearly as positive. RetailNext’s preliminary numbers on the performance of brick-and-mortar stores on Black Friday cited a 16 percent decline in traffic from last year along with a 14.1 percent decrease in net sales and a 0.5 percent decline in average transaction value. However, conversion rose 0.4 percent and sales per shopper were up 1.9 percent.
Combining Thanksgiving and Black Friday, traffic declined 10.7 percent with net sales down 11 percent, average transaction value down 1.9 percent and sales per shopper down 0.1 percent. However, conversion again improved, rising 0.6 percent. “The Black Friday doorbusters have become less and less important as the momentum builds earlier in the week and now includes more of Thanksgiving,” said Shelley Kohan, vice president of retail consulting at RetailNext. “There were more early online sales, too, and that may have the same effect on Cyber Monday as the strength of Thanksgiving has had on Black Friday.”
Kohan thinks with business spreading across more of the week, retailers will benefit by being able to handle order fulfillment and store operations better. “I actually think the traffic becomes more manageable to retailers in a slow and steady manner throughout the course of the day on Black Friday, which results in an overall better shopping experience,” said Kohan.
ShopperTrak estimated that brick-and-mortar stores saw a 27.3 percent increase in traffic on Thanksgiving Day versus a 5.6 percent decrease on Black Friday. Sales for the two days are expected to hit about $12.29 billion, down 0.5 percent from last year’s $12.35 billion total. ShopperTrak suggested caution in interpreting those figures, as last year’s Black Friday weekend was up 1 percent, well below the 3.1 percent gain registered for the entire season.
“Apparel is having its weakest holiday to date in several years, but Black Friday is not normally an apparel-focused event,” said Craig Johnson, president of Customer Growth Partners. “Department store sales were solid only in shoes, particularly boots, and home, both soft home, such as linens and pillows, and hard home, such as small electrics like slow cookers, griddles, toasters and coffeemakers. Consumer electronics stores had their best Black Friday in four years, led by low-cost $450 laptops, notebooks, game console bundles, smartphones and both low-cost and high-end TVs.”
Charlie O’Shea, a retail analyst with Moody’s Investors Service, who covers Wal-Mart and Target, said, “Thursday was the day to shop.” He noted that the two discounters were crowded when they opened at 6 p.m. Shoppers were buying TVs and tablets at Target, and power toys for kids at Wal-Mart. He also noted that starting the season earlier in the month meant that early shoppers were looking for discounts for big-ticket items. In the apparel and accessories categories, that meant discounts for jewelry.
O’Shea was at the upscale Mall at Short Hills in New Jersey on Saturday and said cars were backed up on the highway, exacerbated by consumers heading to the stores for pickup of online orders.
He expects that footwear and apparel sales, along with accessories, will be big in the week or two before Christmas. That’s because right now, shoppers want big discounts, and that usually means electronics, the category that’s “easiest to save money on,” he explained.
According to a survey by Hilco Global Retail Group, c-suite executives are concerned about margin pressure due to pure-play retailers, early pre-season discounts and the shift in sales to online from brick-and-mortar. To counter the increase in discounting, retail executives said they will offer a better mix of proprietary store brands, more targeted marketing and supply chain improvements to protect their margin.
The Thanksgiving period is generally not as important to luxury stores compared with other retail sectors. However, Dallas retailers Stanley Korshak and Forty Five Ten both reported double-digit gains on Black Friday and Saturday. At Korshak, according to owner Crawford Brock, “It was not a typical Thanksgiving weekend for us. Jewelry really came through. A year ago we hadn’t had as much of it.”
“Traditionally, it’s not a huge weekend for Forty Five Ten because our core clients are either traveling or spending time with their families, but this year we had really good traffic,” said Martha Leonard, director of sales. “Resort receipts really drove sales. People were looking for new, beautiful product.” Top resort performers included big-ticket coats and dresses by Dior, Tomas Maier’s cashmere ponchos and relaxed dressing, and understated cream sportswear by Adam Lippes. Other popular goods were scented candles by Frédéric Malle and Diptyque and Kelly Wearstler’s tabletop sculpted gold lips.
Neiman Marcus opened two hours earlier on Friday, offering percentage-off promotions similar to last year.
Shoppers invested in precious jewelry, especially colored diamonds and high-end watches, as well as two exclusive shoe programs — monogrammed Uggs and build-your-own boots by Stuart Weitzman. Colorful and pricy men’s sneakers by Giuseppe Zanotti, Martin Margiela and Ferragamo did well, along with Neiman’s “Love to Give” collection, led by Eddie Borgo’s pavé bracelets, Shy by Sydney Evan’s “loved” necklaces and a Ken Downing wood-scent candle by Nest. “Everything was good,” said Ginger Reeder, vice president and corporate spokeswoman. “We had fur protests [at 18 stores] around the country, but they were not disruptive to business.”