Retailers, in the thick of post-Christmas shopping known as the “second season,” are poised to meet their their holiday sales goals targeting 3 percent gains on average.
Profit margins could fall short, however, due to the early and extended promotions and deep discounting, though retailers saw a late surge in holiday shopping Friday and Saturday that was better than they expected, after a less-than-rousing Super Saturday weekend.
Now they’re counting on gift-card redemptions, merchandise returns, markdowns of winter and holiday goods of up to 70 percent off, and some early spring fashions on the selling floors at full price, to spark business this week.
Christmas has been a season for hard goods, with electronics, toys and home the best-performing categories, and with Best Buy, Home Depot and Lowe’s said to be among the best-performing chains. Beauty was also strong, with Sephora and Ulta seeing robust business, and off-pricers T.J. Maxx, Ross Stores and Burlington Stores reportedly continued to gain market share as did online operations and mobile selling across the board.
On the other hand, most moderate-priced and upscale department stores and fashion specialty stores were challenged and are expected to post flat or negative comparable-store sales numbers.
Macy’s Inc., however, did sound an up note on the season. “Holiday gift sales were driven by the newest products in our assortments,” said Tim Baxter, Macy’s chief merchandising officer. The “tech tidings” trend, one of our big gift statements, was particularly popular with everything from virtual reality viewers to 3-D pens to Apple watches.”
Most of apparel was weak during the season, though active continued to fare well. There’s still an excess of outerwear, although a pickup in coats and cold weather accessories has been seen since Thanksgiving.
“This may be one of the best weeks of the entire two-month period,” said Craig Johnson, president of Customer Growth Partners. Post-Christmas Monday being a day off for many people, benign weather in most of the country, as well as returns, gift-card redemptions, and promotion levels, especially at apparel and department stores, of up to 70 percent off will fuel traffic.
Johnson also cited lingering overstocks of outerwear. “If it doesn’t get sold in the next seven to 10 days, there is a good chance it won’t ever get sold on the floor and must go to liquidation. There’s also new spring merchandise coming on the [selling] floors in many stores and there has been continued strong online sales. We believe some stores will put new spring goods on the floor at full price, even speeding deliveries, so that they can make up some lost ground in gross margin dollars versus plan from earlier in the quarter, since they can’t make up gross margin dollars from sales already out the door, other than by by battling vendors for more markdown allowances. This is an especially acute problem for retailers/vendors in outerwear arena — unless you’re Canada Goose, which remains a hot brand.
“All told, we think this retail week ending Dec. 31 will comprise about 14 percent of total retail sales for the November-December period, or about $89 billion. Last year was a particularly strong Christmas-New Year’s week, since Christmas fell on a Friday in 2015, so the day after was of course Saturday and then Sunday, ideal for post-Christmas traffic. We estimated that Christmas to New Year’s week last year was about 15 percent of total season sales.”
David Bassuk, managing director and co-head of retail practice at AlixPartners, said, “We saw some good momentum pre-Christmas,” meaning the few days just prior to the holiday. “Retailers felt some positive results before the holidays. Coming out of Christmas, it’s the consumer that has the chance to win,” with special promotions that retailers will offer.
According to retail analyst Walter Loeb, “Gift cards which can’t be counted till after they are redeemed may be the saving grace. There was a late surge of shopping and the federal holiday today certainly contributes to the momentum. The weather has been conducive to shopping and people were shopping later and later. Since Super Saturday was a bust, many people postponed their shopping to the last minute.”