After a puzzling and mostly disappointing holiday run, retailers are eyeing the post-Christmas selling period through January for the season’s salvation.
This story first appeared in the December 26, 2012 issue of WWD. Subscribe Today.
Typically by Christmas Day, retailers are confident they’ll make their numbers. It’s not quite the case this year, based on how retail sales have played out thus far. Store executives and analysts contacted Monday and Tuesday said there were two peak periods — Black Friday weekend and last weekend, and an unusually prolonged shopping lull in between. In other words, it was feast or famine, and mostly the latter.
“The year is not over for us yet. We have to continue to stay focused,” said Edgar Huber, chief executive officer of Lands’ End. He said Lands’ End will be driven through January by the usual end-of-season sales as well as new product arrivals, though he was positive about the state of his business. “We will bring in Q4 as we planned. Everyone was waiting for the last weekend. At least for us it worked. We doubled our numbers. We had a strong Thanksgiving, record-breaking cyber sales, then business was very soft until last weekend which was very, very strong.”
Others were circumspect. “There’s so much at stake with post-Christmas. We’ll see,” said one retail ceo who requested anonymity. “There were two extra days of shopping between Thanksgiving and Christmas but it just pushed the business later. Retailers became nervous,” and increased markdowns. “I suspect there is a lot of inventory out there and a lot of good things to buy on sale,” he added.
“It’s time to rethink Christmas,” suggested Lou Amendola, executive vice president of merchandising for Brooks Brothers. “The whole holiday and what families do and how they spend their money seems to be changing. It’s time for everyone to make adjustments.”
He said retailers need to “evaluate the emphasis we put on the shopping period between Thanksgiving and Christmas and thinking that all our profits are made then. People today shop all year long on the Internet and don’t need to wait until Christmas anymore. They’re just not shopping like they used to.”
James Fielding, ceo of Claire’s Stores Inc., said, “We had a terrific November, including Black Friday, and then we had some softness at the beginning of December and the last week has been really terrific,” though the calendar, with 34 days between Thanksgiving and Christmas compared to 32 last year, didn’t help much. “I think the extra weekend between Thanksgiving and Christmas, which was a pattern we saw in 2007, definitely did not create a sense of urgency,” Fielding said. “I feel like people really waited.”
Retail experts are forecasting slim comp-store gains — 3 percent on average. The range should fall from flat to midsingle digits ahead. They also said that most of America’s retailers are focused on dropping prices, which since last week have often been at 40 to 60 percent off and sometimes as high as 80 percent off.
Internet sales are anticipated to stay strong and have apparently sapped sales and traffic from physical stores. If consumers didn’t actually purchase online, many researched products and prices online and became surgical in their forays to the malls, hitting fewer stores and bringing down traffic counts. Manhattan’s Fifth Avenue, usually mobbed with shoppers and tourists in December, was noticeably less busy this month, as were suburban malls.
RetailNext found that store traffic from Thanksgiving to Dec. 23 was down 16.5 percent compared to 2011. Even with the average transaction value up 4 percent and conversions ahead 1.1 percent from year-ago levels, net sales are down 5.8 percent for the season, according to the San Jose, Calif.-based retail monitoring firm. Those figures include “a monster shopping day” on Saturday, but excluded “an extremely busy Christmas Eve,” said Tim Callan, RetailNext’s chief marketing officer. Callan noted that Dec. 22 was a larger volume day than Black Friday this year, and fell just behind in traffic, and that Dec. 19 to 21 qualified as among the top-five buying and traffic days of the season. Taubman Centers Inc., which owns, manages and/or leases 28 shopping centers, also reported that Saturday was the biggest day of the season for many retailers, which were up midsingle digits for the week. There was still a lot of self purchasing this weekend with people taking advantage of all of the sales — particularly in juniors, the developer noted.
“Most consumers have done some sort of research before they go into the store, and they have a better idea of what they want,” added Shelley Kohan, RetailNext’s vice president for retail consulting. “That’s part of the double-digit traffic decline — a lot of people, when they get to the mall, are visiting two or three stores instead of four or five.”
The pace of retailing is generating concerns about spring 2013, from the perspective of revenues and inventories, and triggering changes in the approach to both. Washington’s inability to resolve economic issues, the ongoing impact of Hurricane Sandy and the nation’s overall somber mood are adding to the angst.
“If this fiscal cliff thing really does happen, I think it is really going to hit the markets and hit consumers,” said David Jaffe, ceo and president of Ascena Retail Group Inc., owner of Justice, Lane Bryant, Maurices, Dress Barn and Catherines.
“We are doing revisions on revisions for the first half,” said Crawford Brock, owner of the Stanley Korshak luxury store in Dallas. “The whole fiscal cliff thing is still in play and nobody knows how that will wind up. It could shut down [business] after the first,” of January.
“We are cautious. There’s quite a bit going on that’s impacting customers,’’ Erik Searles, vice president of retail for Oakley, said, citing Sandy and the fiscal cliff, though he sensed consumers grew cautious early this past fall as the presidential election loomed.
“The season came in the last three days,” Searles continued. “It was much more last minute than we have seen in the past.” In 2011, there were eight or nine days of “core” gift-shopping prior to Christmas, while this year, it was a three-day window, Searles said. “The week before Christmas started much softer than we expected. However, these last three days were off the chart. We exceeded projections over the last few days.” Among the changes at Oakley for next year, a greater emphasis on exclusive products sold at the brand’s 225 stores worldwide including 146 in the U.S.
“People are bringing in fresh product sooner,” observed Craig Johnson, president of Customer Growth Partners Inc. That could help make for a record Christmas to New Year’s week, along with many people being off work, all the wild discounting of seasonal merchandise and the onset of gift card redemptions. “This has been a very challenged season. People are buying later, closer to need. We think the average ticket is trading down,” said Johnson.
On the positive side, Johnson believes that Urban Outfitters, Anthropologie, American Eagle, Costco, Home Depot, Lowe’s and Nordstrom had good seasons, and that traffic at J.C. Penney finally picked up after the company accelerated its advertising and newspaper inserts and explained its pricing better. Still, “It will be very difficult, but not impossible for a lot of people to meet their plans,” said Johnson, who forecast a 2.8 percent holiday comp-store gain for retailers. “If you look at December, it’s actually tracking below that so far, but we are anticipating this Christmas to New Year’s week will be a pretty good week.”
BREAKDOWN BY SECTOR
Several sources said that luxury sales have been most difficult and should fare better this week and in January as the high-end discounting grows and fresh designer merchandise arrives. Department stores were said to be surprised by how reluctant consumers were, but business picked up over last week after aggressive markdowns.
“It’s going to be OK, not great,” Richard Baker, ceo of Hudson’s Bay Co., which operates Lord & Taylor in the U.S. and The Bay in Canada, said of the holiday season. “Everything happened late.” Baker said business was better in Canada than in the U.S., indicating “a bit of a dampener” due to the fiscal cliff and some continued impact from Sandy.
“We’re pleased with the business,” said Michael Gould, chairman and ceo of Bloomingdale’s.
Several specialty chains reportedly came out OK and the performance by discounters appeared mixed, with Wal-Mart outperforming Target. “The biggest winners of 2012 holidays, in our opinion, were Victoria’s Secret, Bath & Body Works, American Eagle, Old Navy, Coach and Lululemon,” said retail analyst Jennifer Black of Jennifer Black & Associates.
Standard & Poor’s equity analyst Ian Gordon cut his rating on Target Corp.’s stock to buy from strong buy. “Based on our holiday shopping channel checks, we think customer traffic weakness persisted into December from November,” Gordon said, describing Target. “We think trends improved closer to Christmas but believe certain merchandising initiatives failed to generate customer interest, heightening gross margin risk.” A few analysts have noted that Target’s collaboration with Neiman Marcus on a designer gift collection has fallen short of expectations.
J.P. Morgan equity analyst Matthew Boss said there was a definite shopping surge on Saturday, that Sunday was “pretty strong” and was followed by the expected Christmas Eve consumer push. “There’s people walking around the mall with bags, no question,” said Boss on Monday as he monitored traffic at the South Hills Village mall in Pittsburgh. “The discounts that you’re seeing at specialty [stores] are deeper than what you’re seeing at department stores.…I think Macy’s and Nordstrom have a chance to get back to the low end of where they thought they might come out. A lot of the other retailers have a chance of missing projections entirely.”
“Last year we placed great emphasis on revising our portfolio to provide the sophistication, versatility and quality our customers had asked for in apparel,” said Lana Krauter, president of Sears Apparel and senior vice president at Sears Holdings Corp. “The addition of the Kardashian Kollection strengthened our appeal across multiple categories throughout the store and continued the momentum of key brands like Bongo and True Freedom in the juniors area.” However, “Like all retailers, we are challenged by the cost of goods and the increasing number of both online and brick-and-mortar businesses,” Krauter said. “The economy continues to impact retail.”
“We had just a wonderful Christmas season,” said Kip Tindell, chairman and ceo of The Container Store. “I was struck by how much people seemed to be ready to indulge in delightful, unexpected, little luxuries like our beautifully curated collection of gift ribbons, bows, totes, tins and trimmings. It was the same thing for our Christmas focus on our stocking stuffers — unexpected, whimsical, make-you-smile little gifts that span from poignant to hysterical.”
Tindell, who is also vice chairman of the National Retail Federation, said, “I really expect this to be a good year for the U.S. economy and the retail industry. It’s the irresponsibility of the more radical, freshman and sophomore members of the House of Representatives who are going to temper the year…and make it just good when it could be great. Moderation is where it’s at.”
Kelly Golden, owner of the upscale Neopolitan Collection in Chicago, said, “This season beat our expectations. Since Thanksgiving came earlier this year, people starting shopping sooner. We also had several fine jewelry trunk shows, which our clients responded very well, too. After a few years of holding back, people were treating themselves or their significant others once again. We sold lots of fine jewelry from Irene Neuwirth, Kimberly McDonald, Jamie Wolf and Etername. The average price point for gifts was up from last year. The next few weeks we’ll be focusing on getting our clients into resort mode.”
ComScore Inc. reported that online sales gains — which had been declining from midteen levels earlier in the year — jumped up strongly during the work week beginning on Free Shipping Day, Dec. 17, and ending on Dec. 21. Sales for the five-day period hit $3.69 billion, 52.8 percent better than the corresponding period last year. Free Shipping Day itself reached the $1 billion milestone for the first time and followed the first $7 billion week in online history during the seven days ended Dec. 16.
“We typically do not see such heavy spending this late in the season,” said ComScore chairman Gian Fulgoni, “but the fact that Free Shipping Day occurred on a Monday, combined with the fact that so many retailers extended their promotions into the middle of the week — with guaranteed shipping by Christmas — helped deliver an encouraging late-season surge.”
Through Dec. 21, online sales for the season were up 15.6 percent, to $38.69 billion from $33.48 billion at the same time last year.
HOLIDAY HITS AMID A SOFT SEASON
Retailers did cite several best-sellers, despite the general disappointment. Down coats, down jackets and cold weather accessories did best at Lands’ End. At Bloomingdale’s, the standouts included whimsical iPhone cases from Marc by Marc Jacobs; mustache speakers from Audiology and Native Union pop phones in candy pink; high-top sneakers from Ash and Converse; the Parrot Zik Bluetooth wireless headphones designed by Philippe Starck; men’s sports jackets in velvet and patterns; Moncler and Canada Goose outerwear; alpaca Navajo inspired sweaters from Vince, and Bolivian patterned sweaters from Industry of All Nations.
At Von Maur, which after a last-minute rush wound up with a high-single-digit gain, according to Joy Place, vice president of merchandising, the shining stars were women’s contemporary, designer jewelry, watches and dresses. “We try to deliver as much fashion as possible between December and January because this is what the customer will buy even if they can’t wear it right away,” she said.
At Stanley Korshak, “Every department was up except jewelry and cosmetics. They are not doing the $100,000 jewelry like they were a year ago,” Stanley Korshak’s Brock said. “They are buying $10,000 and $20,000 things.”
At Forever 21, footwear, specifically boots, were a standout category throughout the holiday shopping season, but gift cards did well, too. Linda Chang, marketing director at Forever 21, called the Los Angeles-based retailer’s holiday season “solid,” but acknowledged the battle for sales was waged mostly on the promotional front. “It was surprising to see how many retailers were heavily promotional and how early they were with it both online and offline. That was something new compared to last year,” said Chang, adding, “This holiday season, the shopper won out. They got to see all the promotions that were happening. Because there were so many happening across the stores, they were canceling each other out.”
To boost sales, Brooks Bros. held a sweater promotion the week before Christmas and was prepared to go “deeper on fashion merchandise” with 50-percent-off promotions “rather than the traditional 40 percent. But it’s time to liquidate and move on,” Amendola pointed out. He said customers responded to sweaters and other knitwear. Tailored clothing, which was not planned to be up much, was not a big seller, while women’s merchandise was especially promotional.
Bob Mitchell, copresident of Mitchells Family of Stores, had a different experience. “The last four days made the whole season,” he said. “A week ago, I would have said it was challenging, but Saturday was the best day of the year so far. We had a 360-degree turn from a week ago. Everybody came out. We were really busy, people were positive and traffic was way up. We weren’t promotional, but we were ahead of last year.”
He said he believes customers waited until the last minute because they were distracted by Hurricane Sandy, the shooting in Newtown, Conn., and the uncertain tax situation. “In the end, they had to go out and buy gifts,” he said. The company’s recently renovated Wilkes Bashford unit in San Francisco posted strong results, led by women’s jewelry, accessories, handbags and shoes. At the company’s Mitchells, Richards and Marshs stores on the East Coast, “luxury kicked into gear,” he said, with Brunello Cucinelli, Loro Piana, Zegna and Brioni among the high-performing labels.
HBC’s Lord & Taylor and The Bay stores did best with fashion and high-tech accessories, including handbags and iPad cases, contemporary sportswear, watches, cashmere in men’s and women’s, and denim.
Sears cited the Kardashian Kollection and its expansion into intimates, denim and optical, and its Bongo, True Freedom and Outdoor Life private brands as among its most popular brands.
Vanity Shop of Grand Forks Inc., based in Fargo, N.D., reported that denim, fleece, blazers and jackets were hot items. “Blazers and jackets have continued to take the place of the cardigan business that existed a couple of years ago,” Michael Feurer, ceo and president, said. “We see success in fashion basics as well. We call them those magnet pieces, which are items you can literally run through the store and outfits magically stick to them. This gets back to the versatility of the fashion, [something] that we have seen success with.”
Top-selling items at Target were toys like LeapPads and Furbys; holiday decor; select electronics including Wii U, iPad, iPod Touch and TVs, and cosmetics including value makeup, designer and celebrity fragrances and gift sets like Bodycology and Burt’s Bees. Target said today is the busiest day of the year for gift card redemption, particularly in electronics.
Forever 21’s sales “met our forecast for online, and we are seeing that it is taking more and more market share,” said Chang. “I think that it was a much faster game this year online. Last year, you were able to do promotions for a longer time period or get people interested with easy things such as free shipping, but this year it seems like because everyone offers free shipping and does so many promotions, you have to be a lot quicker.”
At eBay, the focus for shoppers this holiday season was toys, electronics and shopping, with a slew of promotions that kicked off last month and ended right before Christmas Day. This ranged from the eBay Holiday Collective — where the marketplace tapped designers and brands like Billy Reid, Chris Benz, Fallon, Jonathan Adler, Ruffian, Steven Alan and Tibi to create gifts for under $100 — to Toy Box, a pop-up experience from Dec. 6 to 9 in New York’s Meatpacking District that highlighted the hottest toys and had a charitable partnership with Toys for Tots.
There was Holiday Express on eBay Now (the new service that provides product delivery in as little as one hour after a mobile purchase is made) from Dec. 17 to 22 for last-minute shoppers. The service, which works via geo-sensing location technology from Milo and seamless payment options from PayPal, kept free delivery running until midnight during this period. The top-selling products through December were white gold diamond stud earrings, Ugg boots, Samsonite luggage, Emporio Armani sunglasses and Coach bags.
EBay, which believes the surge in mobile engagement has dramatically shifted the retail calendar, projects $10 billion in mobile sales by the end of the year. But, rather than Cyber Monday, once thought of as the official kick off to the online holiday shopping season, Sunday Dec. 9, dubbed “Mobile Sunday,” was the heaviest shopping day, with eBay hitting a record daily high in mobile volume. The second biggest mobile shopping day was the Sunday prior, Dec. 2, with global payment volume exceeding that of Cyber Monday.
Lyst reported similar findings. The social commerce network that operates on a referral revenue model and aggregates the inventories of its retail partners into a style feed, also saw sales on Dec. 10 (Green Monday) that surpassed Cyber Monday and Black Friday. Sales from Dec. 17 to Dec. 18 were close to Cyber Monday, said Lyst ceo Chris Morton.
At The Outnet, sales across the board have been strong, according to the online retailer that currently sees 1.4 million monthly visitors, according to managing director Stephanie Phair. The most-searched-for items this month were fur, leather and cashmere, and top searched brands were Alexander Wang, Alexander McQueen, Lanvin and Rick Owens.
Meanwhile, retailers are closely watching what Macy’s is doing with its comprehensive “Week of Wonderful” campaign targeting the postholiday shopper with advertising, catalogues, special events and early spring arrivals. Vanity Shop of Grand Forks Inc.’s Feurer said, “It is an absolute opportunity for us to be very strategic about some of those traditionally less opportune times in the retail calendar year to make a statement, to have a fresh perspective and be forward looking, whether it is in the color or merchandise offering.”
■ Same-store sales up 3 percent on average; range from flat to midsingle-digit gains.
■ Bestsellers: boots; contemporary sportswear, jeans, tech accessories, gift cards, embellished cashmere sweaters and graphic T-shirts.
■ Deals drive strong Black Friday and late December results; business stalls in weeks between.
■ Post-Christmas selling more critical amid slim Nov.-Dec. gains.
■ Little motivation to spend amid somber national mood and worries over fiscal cliff.
■ Extra two days between Thanksgiving and Christmas reduces urgency to shop and delays purchasing.
■ Tight budgets put focus on lower-priced items and self-gifting.
■ Online and mobile shopping continue to rise.