It’s been a bumpy holiday stretch with highs and lows, different dynamics than past seasons and big-time performances by some of the nation’s most powerful businesses — Target, Walmart, Best Buy, Costco and Amazon.
Several home stores like West Elm, Restoration Hardware and Williams Sonoma did well, as did Bath & Body Works and Lego. On the apparel side, Lululemon, American Eagle, Aerie, Bath & Body Works, TJX Cos. and other offpricers saw robust traffic; specialty apparel and department stores fared less well.
Double-digit e-commerce gains were common, offsetting shrinking shopper traffic at malls. Promotions started earlier and lasted longer though the discounts weren’t any deeper than a year ago. Black Friday, Cyber Monday and Super Saturday saw robust sales though traffic trends quickly simmered down in the immediate days following. And retailers doubled down on providing conveniences like buy online, pickup or return in store, faster deliveries and self-checkout.
With six fewer days between Thanksgiving and Christmas this year, the retail planning was challenging. Less time for shopping meant consumers hurried to complete their gift lists but couldn’t take full advantage of all the doorbusters and holiday bargains to buy much for themselves.
This week, retailers and suppliers seemed satisfied with the holiday 2019 outcome up to Christmas Eve. They’re expecting lots of post-Christmas business at least through New Year’s, as consumers seek even sharper discounts related to clearances, start redeeming gift cards, and returning those ugly Christmas sweaters, toasters and other unwanted gifts.
Still, the mood this week was noticeably subdued. Industry executives weren’t disappointed with the holiday business so far, but had wished for more.
“We definitely saw traffic lower than we anticipated but it’s played out the way we expected,” said Mary Ellen Coyne, chief executive officer of fashion chain J. McLaughlin. “There was a slowdown in cold weather accessories. We don’t see people running to pick up faux fur hats or gloves. There’s a general sense that the customer is really looking for more interesting gifts, whether it’s home, technology or an experience. They are tired of giving typical presents. That being said, we had high, single-digit increases and full price was definitely driving the business. We don’t go on sale until the day after Christmas.” Two of J. McLaughlin’s best-performing categories have been outerwear and sweaters.
“Things are progressing as we expected,” said Michael Appel, chairman and ceo of Rue21, the value-oriented Pittsburgh-based casual apparel chain for teens. “It’s an unusual Christmas with one less selling week. We knew business would come late and we planned for it. We have strong analytics which really helped us plan out. One less selling week compresses the purchasing into the last week before Christmas. Customers just don’t wake up until all of a sudden.”
As Christmas approached, Appel said business “opened up very nicely. We are looking for a strong couple of weeks after Christmas as well,” in part due to high school students returning to class on Jan. 6 after holiday break.
“The most important thing is having great merchandise at affordable prices,” said Appel. “We see a flight to value. Retailers in that segment are doing better. A lot of our customers shop at Target and Walmart and come to us for fashion. Rue21’s holiday best-sellers included destructed sweaters, wireless ear pods, plush pants and fragrance.
At CosBar, co-president Oliver Garfield said the Aspen, Colo.-based high-end beauty chain felt the effect of the calendar shift. The second week of December was “exceedingly soft,” said Garfield, but business dramatically increased Dec. 16 to Dec. 18. Garfield said Super Saturday was below plan, although with Christmas falling one day later in the week, the days leading up to the holiday became progressively stronger. Hot products for holiday were non-skin-care, value-priced gift sets, candles and travel accessory kits, and Slip, which creates silk pillowcases, eye masks and scrunchies. Skin-care sets struggled and the abc fragrance was down. CosBar’s promotion levels were consistent with last year.
Apparently, there’s no consensus on whether the shorter selling season significantly impacted retailers. “I don’t think that’s such a big deal,” said Barbara Kahn, professor of marketing at the Baker Retail Center at The Wharton School. “People still shop right before Christmas,” regardless of the calendar.
Among the 2019 holiday trends, Kahn cited a shift back to physical, touch-and-feel products like the Laugh Out Loud toy dolls, which are popular items sold on Amazon. She also cited a redefining of what convenience means whether that’s the intertwining of phone, online and in-store shopping, or efforts by Target and other retailers to compete harder against Amazon. “Target has created an in-store experience. Their numbers have been great. There’s a lot more pushback against Amazon.”
Regarding promotions, Kahn said, “With the economics of delivery so bad, it would make sense that retailers are trying to not be as promotional as in the past to protect profitability. It’s hard to compete in this climate. Yet retailers are clearly competing with the ‘illusion’ of price promotions,'” meaning providing plenty of loss leaders on selling floors and online near merchandise that’s not as heavily promoted.
Reaction from industry executives was toned down, expressing a mix of the good and the bad.
“We saw record sales for Black Friday and Cyber Monday with some slowdown during Super Saturday. With still a couple of shopping days left, it’s too early to say what overall holiday will look like,” said a Neiman Marcus Group spokesperson on Monday.
“Our business is OK, up low-single digits, but I don’t hear that we are better or worse then others,” said a ceo of an upscale fashion brand. “Seems these days, it’s month-to-month.”
The 2019 “Holiday Retail Index” by Verizon showed strong online shopping last weekend, indicating a 15 percent increase in e-commerce traffic on Friday; a 21 percent increase Saturday, and a 14 percent increase Sunday compared with the Nov. 1–27 period.
The final verdict on holiday 2019 and how profitable it was won’t be known until fourth-quarter figures get posted in February and March, though some retailers are likely to release sales results ahead of the normal reporting schedule.
Generally, retail experts and trade groups are forecasting 4 to 5 percent sales gains over last year, though margins will be pinched by heavy and prolonged promoting and the costs of faster deliveries and other conveniences such as setting up service desks in stores to pick up online orders. Tariffs are seen as having minimal impact.
November was mostly slow at retail until Thanksgiving week. After Cyber Monday, there was a long lull in shopping (a lull occurs every year after Cyber Monday) until last week. “Super Saturday” sales reached a record $34.4 billion, marking the industry’s largest single volume day in U.S. history, according to Customer Growth Partners, the research and consulting firm for the retail industry.
CGP reported Monday that Super Saturday — the last Saturday before Christmas — beat last year’s record of $31.9 billion in sales by 10 percent. It also beat Black Friday’s $31.2 billion in sales, though that was expected.
“After a warm fall that depressed October and early November outerwear sales, retail has gained speed ever since, peaking on Super Saturday — and Sunday was no slouch as well,” said Craig Johnson, president of CGP.
He said the retail sector was paced by Walmart, Amazon, Costco and Target, but “transaction velocity” was strongest at off-price chains. “The spending momentum was so strong that even the long-ailing department stores had their best weekend of the season,” Johnson added.
Among the more optimistic of forecasters, Johnson sees retail sales coming in with a 5.2 percent increase for the season, though he added, “We believe that apparel and department stores will lag the 5.2 percent overall, with lower single-digit growth.” He characterized apparel and department stores are quite promotional, often 40 or 50 percent off and sometimes with an additional 10 percent off tacked on.
“Consumers were enticed both by promotions on Super Saturday and incentives for expedited shipping,” said Michele Dupré, Verizon’s leader for retail, hospitality and distribution, on Monday. “Retailers on their game and confident in their distribution channel are even guaranteeing delivery by Christmas Eve, drawing in the last-minute shoppers.”
“The weather certainly was supportive of the store traffic and the items that consumers were putting in their baskets,” said Evan Gold, executive vice president of global partnerships and alliances at Planalytics, a weather intelligence service for businesses.
In particular, the weather benefited some big shopping days. According to Planalytics, the week that ended on Super Saturday was the coldest since 2016 and the driest since 2011, increasing the demand for winter jackets, gloves and sweaters.
For this week ending Dec. 28, it will be mostly dry for large portions of the U.S. “Weather is supportive of store traffic during the final days leading up to Christmas. For many, the temperatures are warmer in comparison to last year,” Gold reported.
Next week, ending Jan. 4, is forecast to be colder than last year in the Northeast but warmer in the West, and wet conditions return from the Southwest to the Northeast leading up to New Year’s Eve and New Year’s Day, which will include rain for many and snow for some, “which can shift post-Christmas purchasing from in-store to online,” Gold said. It could also discourage going out to stores.
At Westwood Garden State Plaza in Paramus, N.J., on Monday, a sign at Neiman Marcus called out 60 percent reductions and an additional 25 percent off certain items. Hollister advertised 40 to 60 percent off throughout the store; Gap was 50 percent off and Banana Republic windows screamed an extra 50 percent off styles.
“There’s some very heavy promotional activity, which says there’s too much capacity in live inventory and apparel square footage,” said Johnson. “There are two trends, women are shopping more like men these days. Women used to shop heavy on apparel and little on tech. Now they are rotating much more to tech and out of apparel, and when they do shop apparel it’s more likely at Lululemon, T.J. Maxx and Athleta for ath-leisure and performance wear.”
Johnson cited rising conversion rates in stores helping to offset declining footfall. His firm dispatches 18 observers to malls and outlets, lifestyle, offprice and power centers around the country and have observed solid traffic and transactions at Walmart, Costco, Target, Dick’s, Best Buy, TJX and other offpricers. “Even department stores had a pretty good Super Saturday weekend.”
However, one outerwear and apparel supplier said: “In our part of the industry, it’s been spotty. The weather has been inconsistent. One week it’s warm, the next week it’s cold, and today you can walk around without a jacket. For us now, it’s really about the cold weather business and the biggest thing impacting us is the weather. But last week was strong so the sales have been inconsistent.”
While some forecasters have been bullish on consumer spending, the supplier said, “those numbers are skewed toward everything, all the electronics, Best Buy shoppers, tech, home stuff. They don’t break out apparel separately from everything else. It’s skewed.”
“From what I am seeing, it’s more of the same. The good retailers are doing good — Target, Walmart, Amazon. And last weekend I was in a Nordstrom and it was jammed. But the situation is hard to call still,” observed one supplier to major chains.
“It’s going to be crazy through the weekend with all the returns and people redeeming gift cards. There’s really going to be business this week and through the weekend,” said Stephen Lebovitz, ceo of the Chattanooga, Tenn.-based CBL Properties, which has a portfolio of 108 properties including enclosed malls, outlet and open air centers in the South and Midwest, among them Fayette Mall in Lexington, Ky., Hamilton Place in Chattanooga and Cross Creek in Fayetteville, N.C..
“We think it’s been a great season, a short season where shoppers have a sense of urgency. We have seen strong traffic and retailers have been been very positive about their year. Last weekend was really good, similar to Black Friday,” said Lebovitz. He cited Lego, American Girl, Bath & Body Works, American Eagle, Aerie and H&M as attracting good traffic. He also said certain Macy’s stores have captured additional business in malls where competitors have closed.
Still, Lebovitz acknowledged, “There’s no question more people shopping online has an impact on traffic. We are compensating by bringing in new kinds of uses, entertainment such as Dave & Buster’s and Round One. In a former Sears in Milwaukee, we redeveloped into a Whirly Ball, which is a really fun cross between lacrosse and bumper cars; restaurants, and a Movie Tavern by Marcus. We are undergoing transformations in our properties.”
“All things considered, we’re pretty pleased with this holiday season,” said Joseph Coradino, chairman and ceo of PREIT, a Philadelphia-based real estate investment trust. “People are shopping, they’re dining out, they’re going to Christmas parties and they’re carrying bags. The stories around malls being in dire straights, are certainly, based on what we’re observing at this point, very exaggerated. We’ve been tracking traffic from Thanksgiving through Dec. 15 and we’re up 8 percent. At some properties where we’ve completed redevelopment projects, we’re seeing 20 percent to 30 percent increases.”
Fashion District Philadelphia, a 900,000-square-foot center spanning three city blocks downtown and a joint venture between PREIT and Macerich, has seen 4 million visitors since opening Sept. 19. “That’s a significant number,” Coradino said. “It speaks to the project and its transit-oriented nature. We did something very different in terms of dining and entertainment and coworking. It’s a bit of a hybrid, but it’s a good model to use as we think about the business going forward. This holiday is a key one for us in terms of all the work we’ve done on our properties.” At Plymouth Meeting Mall in Pennsylvania, Macy’s was replaced by Burlington, Dick’s Sporting Goods, Miller’s Ale, and Edge Fitness. At the Woodland Mall in Grand Rapids, Mich., Von Maur, Cheesecake Factory and Urban Outfitters were added.
“We’re at a time right now where the customer really wants to be courted,” Coradino said. “Customers want more than just a place to shop.”
For something unique in cosmetics, customers ventured to Shen Beauty in the Cobble Hill section of Brooklyn. Shen specializes in clean and hard-to-find brands. While skin care already comprises 50 percent of the retailer’s sales, this holiday season “it’s skyrocketed” said founder Jessica Richards, driven by niche lines with cult followings such as Dr. Barbara Sturm, Vintner’s Daughter and Augustinus Bader. Products such as the Vintner’s Daughter Active Botanical Serum and Augustinus Bader The Cream are “easy, giftable items with brand recognition,” Richards said. She’s also seeing a big bump in services being purchased as gifts, such as the Shen Sculpt Facial, a noninvasive treatment that works on the muscular structure of the face — and micro-blading and lashline enhancement. “It’s makeup out the door,” said Richards.
Categories at Shen typically lagging around holiday season have been lifted by the addition of new brands. Richards noted that Westman Atelier does well with its no makeup-makeup approach created by founder Gucci Westman. “It’s a clean, easy-to-use brand that keeps it simple,” said Richards. The Westman Atelier Le Box gift set, $173, which includes the brand’s Lit Up Highlight Stick, Baby Cheeks Blush and Super Loaded Highlighter, has sold out three times at Shen.
Body care at Shen has “exceeded expectations” for holiday, said Richards, who called out “beautifully packaged brands” Haoma and Necessaire.
“Overall, the season was strong,” concluded Verizon’s Dupré. “With enticing and continuous promotional offers from retailers, we saw consumers engaged on a consistent level throughout November and December. We saw an increase in engagement over the weekends when shoppers have downtime, but the spikes were less compared to previous years. Consistent and steady engagement with fewer spikes in traffic shows that retailers kept consumers engaged throughout the season and more than likely gained market share over the season starting in November.
Asked about how shopping dynamics are different this year, she pointed to Cyber Monday. “The purpose of Cyber Monday has changed. Cyber Monday was once geared toward online-only retailers, where now it has blossomed into another day for just about all retailers to drive engagement. Cyber Monday is now an opportunity for bricks and clicks to coexist.” And like Black Friday, it’s no longer a single-day event. Cyber Monday and Black Friday promotions can last a week.
HOT CHRISTMAS ITEMS
• “Frozen 2” and “Star Wars” licensed products.
• Ear pods
• Distressed jeans
• Gift cards
• Apple iPhone 11 and Series 5 watches
• Discounted large-screen smart TVs
• Cashmere sweaters
• Weighted blankets