Following Boxing Day’s swell of mall traffic and markdowns, retailers on Sunday sounded weary over their inability to sell more seasonal merchandise and resigned to a challenging spring season ahead.
Holiday 2015, they concluded, was tough, impeded by record-high temperatures on the East Coast that hurt sales of outerwear and cold-weather accessories, as well as declining tourism around the country, and reduced traffic in the malls. Online gains were big, helping to keep retailers on track for the expected 3 percent to 3.5 percent revenue gains, and masking some of the brick-and-mortar shortfall. Retailers could show fourth-quarter profit declines due to aggressive discounting that started earlier than ever this year and never really let up.
On Jan. 7, several retailers will release December sales figures, giving a clearer read on their holiday business. In addition, some retailers that don’t normally report monthly sales will next week post holiday results, combining November and December figures.
“Now the question is, ‘What’s going to happen between Christmas and New Year’s?’ I’m not hopeful,” said Lou Amendola, chief merchandising officer at Brooks Brothers, which started its semiannual sale on Saturday. “The long-term forecast is for a mild winter and a cold spring. The spring calendar is not easy because Easter is early, in March instead of April. It’s an election year and interest rates are going up. The consumer is very fickle and apparel is not a top priority. So the signs are not there to be optimistic.
“But we’ll get through it. We always do,” he added.
There’s no question that after a difficult year, retailers will make serious adjustments, much of them surrounding buying procedures and how to reduce excess inventories, and searching harder to find more compelling fashion assortments that might excite the more fickle consumer. Moves to smaller, more frequent deliveries will be made to generate a steadier flow and aura of newness. Off-pricers are believed to be already buying goods to stowaway for holiday 2016.
In what’s been a season of changing shopper patterns and industry dynamics, lessons for the long term are being learned — about the continued steep rise of the Internet and mobile commerce; how discount-oriented consumers are increasingly becoming, and how retailers must reexamine their store counts and how assets are utilized to support all channels of shopping. Major retailers such as Macy’s have been closely reexamining their square footage, and closing some units while contemplating alternative uses for certain locations. There’s also a consensus that Americans are shifting their spending to nonapparel categories, and to things they like to do, such as dining out and travel. As Amendola said, there’s “a new reality” among consumers. “They only buy when they need something. If they don’t need something, they wait. The new year will bring an adjustment to how we react to this changing environment,” he said.
“People are looking for experiences, rather than just a product,” observed Kevin McLaughlin, cofounder and creative director of J. McLaughlin. “People want to learn how to kayak or travel. Those things are competing for the retail dollar.” McLaughlin owns the Island restaurant on the Upper East Side of Manhattan. That business, compared to retailing, is easier, he said. “You’re not worried about markdowns. It’s full price everyday and it’s not that hard to make a good crab cake.”
Regarding Boxing Day, McLaughlin said, “We had an average Saturday on total sales but that’s with a lot of returns so it was OK. Last week, we had a solid, single-digit comp store gain.”
“All told, this was as strong a weekend as we have seen all season, with better traffic than Black Friday, and almost as heavy than last Saturday,” said Craig Johnson, president of Customer Growth Partners. “Just as important in this margin-impaired holiday season, our field team saw better full-price sell-through than any other time this quarter, aided by gift card redemptions, and by new product on the floor this weekend at stores ranging from [Michael] Kors to Lululemom, and Hollister to Neiman Marcus.”
“This season was a challenge,” said Bob Mitchell, copresident of Mitchells Family of Stores. “We thought we would see a pickup for the holidays, but we were disappointed. The sales trend of the season continued. It really wasn’t weather-related.” Especially in men’s, “traffic was down and there was not enough new product in the market.”
The category that struggled the most, he said, was tailored clothing. “The cycle of men updating their suits and sport coats for fit has apparently run its course, and we felt that in December.”
Beyond the men’s dress wear malaise, “across all product categories and price, nothing was really doing better than anything else. Everything slowed down,” Mitchell said.
Women’s wear, which was on sale all month, performed better than men’s, especially accessories and shoes. Jewelry, which other retailers have cited as one of their better categories, was a laggard.
“It certainly wasn’t a terrible holiday. But it didn’t live up to expectations. Unfortunately, I think we’re going to see more of the same,” Mitchell said. “It’s not all doom and gloom, but I see nothing that’s going to tip the scales one way or another.”
One retail chief executive officer who requested anonymity, said, “Traffic was better Saturday than it had been. The fact that the day after Christmas was a Saturday was good timing. It helped, though it still wasn’t great. The weather continued to be a problem for everyone but there’s still buying [for outerwear] that happens in January. Presidents Day is really the end of it” for most department stores. “The more high-end your store, the earlier you convert to spring.”
WINNERS AND LOSERS
After Monday and Tuesday, when snow is predicted in the East, above average temperatures will resume, putting another stop to outerwear sales. Yet it’s not all bad this season. Among the retailers said to be winning the battle are Foot Locker, Lululemon, Express, American Eagle Outfitters, Victoria’s Secret, Forever 21, TJMaxx, Ross Stores, Burlington Coat Factory, Ulta and Zale Corp.
Retailers said to be doing OK but not going gangbusters are Wal-Mart, Target and the dollar stores.
Those seen having a tougher time are department stores, including Macy’s, Bloomingdale’s, Lord & Taylor and Nordstrom and various regional operators such as The Bon-Ton Stores Inc. Luxury chains are also said to be having a difficult season including Saks Fifth Avenue and Neiman Marcus.
The best-performing categories have been toys, jewelry, fashion boots, home and ath-leisure. The worst-performing categories have been coats, cold-weather accessories, luxury and women’s sportswear.
By Saturday afternoon in Manhattan, the streets were busy though less crowded than past seasons. Macy’s Herald Square was packed, particularly the main and second floors. “It’s crazy in women’s shoes, but if you are looking for men’s shoes, it’s less crazy over there,” one Macy’s worker told a visitor. Macy’s “one-day sale” presented a range of markdowns, most at 20 percent to 50 percent off, depending on the label and the item. Some Vince Camuto women’s apparel was marked 20 percent off, while some Puma women’s athletic shoes were 30 percent off. French Connection was at 40 percent off, and in coats, the markdowns were steeper with select labels at 60 percent off, including Michael Kors down puffers.
Banana Republic on 34th Street was also busy, but it took a few hours for traffic to get up to speed. “It was slow here in the morning but it seemed like after the [promotional] e-mails were sent, they came in,” said one Banana Republic associate. Among the best deals were men’s Shetland wool sweaters, originally priced $130, marked down to $79.99 and then offered at 60 percent off that. The “Aiden” flannel pants were originally $79.50, then reduced to $64.99 and also offered for 60 percent off that price.
Steve Madden ran a buy-one-get-one offer of buy one pair of shoes, get the second for 70 percent off. Express offered 50 percent off everything in the store, except the Express One Eleven and Express Edition lines, featured brands and gift cards. Mango was up to 50 percent off, and Foot Locker, which seemed more limited in its markdowns than other specialty chains, dropped some $90 sneakers to $70.
Uptown on Columbus Avenue at around 3 p.m., business seemed light at such stores as Athleta, Club Monaco and Theory. Magnolia Bakery, on the other hand, had a long line.
Garden State Plaza in New Jersey experienced gridlock for hours in its tiered parking garage on Saturday, while shoppers at NorthPark Center in Dallas were directed away from glass windows and doors by security officials when tornadoes struck North Texas Saturday afternoon and evening. The maelstrom claimed 11 lives and did heavy damage in suburbs south and northeast of Dallas. Heavy rain and hail fell Sunday and a flash flood watch was in effect until early Monday with snow likely that evening. The weekend aside, “The season was busy from start to finish,” said Kristen Gibbins, executive director of marketing at NorthPark. “We’re anticipating meeting or surpassing last year.”
Last Wednesday, two dozen tornadoes swept through seven states, killing 14 people. Major urban areas were not hit, though retailers concentrated in smaller communities, such as Wal-Mart, J.C. Penney and dollar stores, lost business. Memphis, among the cities hit, is a hub for Federal Express, which had delays getting merchandise out in time for Christmas.
Overall for the season, deliveries went well for retailers and carriers, according to Steve Osburn, director of supply chain at Kurt Salmon. The consultants conducted a test, monitoring 70 packages from 30 retailers that promised to deliver before Christmas any orders placed from Dec. 19 to Dec. 23. Osburn said 95 percent of the packages made it on time, and that retailers moved packages out of their facilities fast enough 97 percent of the time. Carriers made timely deliveries 98 percent of the time.
Last year, Kurt Salmon conducted a similar test and found that 87 percent of the packages were delivered on time, with all of the late deliveries attributable to carrier mistakes and inabilities to handle large volumes. “This year, consumers requesting last-minute shipping won to a big extent,” Osburn said.
Chris Christopher, director of consumer economics at IHS Global Insight, an economics research firm, predicted a 3.4 percent uptick in holiday sales, lower than the 4 percent from last year, but better than in 2012 and 2013. “Holiday began sooner in early November. Consumers hanged low in September and October, then came on strong as discounts were deeper than expected as retailers had high inventory levels and needed to move the goods out the store,” he said.
He characterized shopping as strong in the last few weeks, with much conducted online. “Online grew in the double digits, and one evidence of that is UPS carriers saying there might be a problem in getting the packages delivered to the residences on time given the onslaught of deliveries,” he noted.
Anuj Nayar, senior director of initiatives at PayPal, described mobile as the season’s clear winner. “The [mobile channel] was different this year. Usually we see electronics as the big category, but this year we saw fashion as the big mobile category.” Fashion was 4x more popular than the next category, electronics, on mobile, Nayar noted.
Nayar said PayPal activity for the holiday shopping season spiked on Sept. 30 and remained steady in the fourth quarter due to improved smartphones, and better Internet connections. “These days consumers can do their shopping in-between meetings or during their commute to work. That changes how retailers pitch their deals,” he said.
He cited a new e-gift phenomenon through Loopgift.com. An individual can send an e-gift using the platform, include a description and photo of the gift selected and the recipient has the option of selecting something else from the Loopgift network of participating retailers. “This is a new phenomena where gifting starts earlier and goes later. You can even choose the gift the morning of Dec. 25, print out the copy and slip it in an envelope to give to the recipient that day,” Nayar said.
For retailers that didn’t bulk up on heavy parkas and puffers, the unseasonably warm weather worked in their favor. Australia-based fast-fashion retailer Cotton On kept its stores filled with trans-seasonal sweaters and lightweight jackets that resonated with customers. Tech accessories, such as earbuds and phone chargers were a hit, while cups and cosmetic gift bags weren’t unique enough to woo shoppers, according to Cotton On’s U.S. general manager Mark Pan.
The retailer pulled back on promotions this year, Pan said, adding, “Our markdowns are coming in lower than we had planned because of the health of the business so we’re going to be going into the new year relatively clean from an inventory standpoint, which is great from a margin point of view and in terms of our ability to offer newness.
“There’s obviously a lot of traffic in the malls after Christmas,” Pan said. “What we’re really targeting is not just to have it be a pure sales event. It’s to give customers an opportunity to buy something new and fresh they haven’t seen before with their gift cards and exchanges in that post-Christmas frenzy. The ability for us to offer newness is really hopefully where the business is going to be headed in the future.”
Christine Olcu, global head of retail for American Apparel, said the company has seen shoppers getting increasingly enticed by Boxing Day sales for the past five years. On Saturday, American Apparel unleashed a company-wide promotion billed as a Boxing Day sale. “They do get that there’s something that’s going to happen that causes that excitement to go back into stores,” she said.
“There was one very obvious difference that made this holiday season differ from previous ones and that was the activity on our e-commerce site,” said Claire Distenfeld, owner of Fivestory on East 69th Street, which sells designer apparel, jewelry, handbags, shoes and accessories. “Like clockwork, the minute we went to 40 percent off in the store and online — which was right before Thanksgiving — the sales began to double and triple, and much to our surprise, have not slowed down since.
“We attempted a different approach this year,” Distenfeld said. “Instead of doing three tiers of markdowns of 30 percent, 40 percent and 60 percent, we did two, 40 percent and 60 percent. We also started two days earlier than last year. The reaction from our shoppers was incredible. It was as if everyone was ready and waiting to swipe their credit card and just needed a good bargain and the holiday season as their excuse.”
Laura Vinroot Poole, owner of Capitol, the Poole Shop and Tabor in Charlotte, N.C. said, sales were up by double digits for December and single digits for the year. The gains were partly driven by holiday markdowns. “We always go on sale at the same time as the majors,” Vinroot Poole said. “We watch Net-a-porter and Barneys.com, and Neiman Marcus is around the corner.
“There’s too much merchandise out there,” Vinroot Poole said. “This year, I felt clients were in a different head space. They were reevaluating what’s important. People weren’t buying a new cocktail dress for every cocktail party.”
Fine jewelry was a bright spot for Capitol’s holiday business. “We had significant fine jewelry sales,” Vinroot Poole said. “It was a jewelry year. People spent more on jewelry than in previous years. Jewelry feeds into that whole idea of experiential spending.
“We did really with Valentino and Saint Laurent,” Vinroot Poole said. “We’re going to pare down some of the English designers that didn’t perform very well, particularly those selling $2,000 cocktail dresses.”
Vinroot Pool gleaned lessons from the recent holiday season, including carrying less inventory, and weighing that inventory more toward buy-now, wear-now, even though the window for selling the merchandise will be short. She’ll also buy fewer coats and less warm weather gear, although the furs she featured “had a decent sell through.”
Nevena Borissova , founder of Curve, a multibrand retailer with five locations, in New York’s SoHo, Los Angeles, Malibu, Miami and San Francisco, said, “We actually grew. The last few months the numbers were a little low but we moved the units. Overall, we had an over 73 percent sell-through.”
Standout collections were Anthony Vaccarello and Joseph Altuzarra. “The bridge designers, priced under $800, are really performing,” Borissova said. “I’ve started to sell Christophe Lemaire. It’s modern and affordable, under $1,000.”
Curve’s customer “has money, but is being cautious. They want value,” Borissova said, noting that the average sale in the stores is $1,200. “I think people are coming back to brick-and-mortar, but it’s a different brick-and-mortar because they know what they want,” she said.
Borissova, who doesn’t have an e-commerce business, is working on launching a Web site next year. She revealed that she’s also working on a 7,000-square-foot lifestyle store with Tom Dixon products in Culver City, halfway between downtown L.A. and the beach, in Haden Track, an area being reimagined by architects.
At Target, electronics and toys have been popular. “We’ve seen great interest in the Apple Watch, iPads and gaming consoles both in stores and online,” said spokeswoman Amy Joiner. Leading toy brands include Lego, Barbie, Toys to Life and gadgets geared toward science and technology. Star Wars-related items have also been popular. In apparel and accessories, fashion, fur, sparkle, shine, as well as skirts for party dressing, including sequined, scuba minis and tulle midis, have been selling well. In beauty, top sellers are Sonia Kashuk’s limited-edition holiday brush sets and gift sets from ELF, NYX, EOS, Savannah Bee and Bubble and Charm.
“Warm weather across the country has suppressed sales of things we’d typically expect to see strong sales for this time of year — like outerwear and snow blowers,” said Liza Landsman, chief customer officer at Jet, the online marketplace that launched five months ago.
Since Cyber Monday, Jet.com has had its eight highest sales days including its highest marketplace gross merchandise volume day [GMV] with more than $2.5 million. Cyber Monday saw about $2.2 million in GMV. Landsman projects that December will generate $44.9 million in GMV, exceeding the original fourth quarter targets. On Dec. 16, the marketplace saw its two millionth member join.
Jet’s best-selling categories have been electronics, toys, sporting goods, home decor (including holiday decorations) and appliances. As the holidays approached, Landsman said there was a surge in purchases for Star Wars merchandise, video games and jewelry and watches.
“Consumables became a smaller part of the mix in the weeks leading up to Christmas but have reemerged in the last few days as people start laying in supplies for New Year’s parties, bowl games and just restocking the pantry after lots of holiday guests,” she said.
“Our typical strongest selling categories this time of year are boots and outerwear. Unfortunately, the weather strongly affected the selling of these two categories,” said Kelly Golden, owner of Neapolitan in Winnetka, Ill. “Even in Chicago, as weather patterns continue to shift, people spend more time traveling to warm weather locations,” Golden said, adding that selling periods have gotten shorter.”
“With the majors breaking for sale earlier this year, we will be investing less in these two categories going forward,” Golden said, referring to boots and outerwear. “Our best-selling ‘gift’ categories were fine jewelry and leather goods, both categories continue to grow for us. People are really looking for investment pieces. A lot of clients were shopping for gifts but also found something for themselves. Traffic was fairly continuous with a peak a few days before Christmas. I don’t expect anything major post holiday as it is typically not a big week for us.
“There is price transparency on the Internet and a momentum where sales break earlier and earlier each season and the selling time for product on the floor continues to get shorter and shorter. Even the luxury customer has become accustomed to markdowns,” Golden said. “Gucci took a stand this season by not marking down any fall product. I hope other luxury houses take a similar stance. Overall, there is too much product out there and markdowns are diluting the luxury industry.”