For retailers across the country, it finally felt like Christmas, even without any snow.
Holiday sales came late and came on strong in the days just preceding Christmas and Hanukkah, and store executives anticipate a vigorous run of gift-card redemptions, winter clearances and some early spring fashion selling at full price in the days before New Year’s.
“It’s been a little unnerving this season — very intermittent since Black Friday but the two days leading up to Christmas were fantastic and way ahead of projections,” James Von Maur, president of the Davenport, Iowa-based Von Maur Inc. told WWD on Monday. “We expect today [Monday] to be very strong. Gift card sales are quite a bit higher than last year — 15 percent.”
Macy’s Inc., too, put an upbeat 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.”
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“It was a roller coaster,” said Lou Amendola, chief merchandising officer for Brooks Brothers. “Thanksgiving week was so-so, then we saw a real dip but then we went back up. The week of Christmas got people into the shopping mode, fueled by cold weather in the Northeast and Midwest. It wasn’t worse or better than we anticipated, but there were jitters and optimistic moments that seemed more extreme this year.”
While online business was a standout early in the season, Amendola said the brick-and-mortar stores rebounded at the end. “Once we hit a point where you couldn’t get a gift online in time, we saw the momentum build in the stores.”
Outerwear and cold-weather items excelled and were driven by “stories,” not price, Amendola said. “If we told the customer that something had a reason for being, like it repels water or is wind-resistant, it sold.”
“This may be one of the best weeks of the entire two-month holiday period,” said Craig Johnson, president of Customer Growth Partners, citing the benefits of Monday being a federal holiday, benign weather through most of the country, as well as returns, gift-card redemptions, and promotions at apparel and department stores as high as 70 percent off all generating traffic.
“This retail week ending Saturday, December 31 will comprise about 14 percent of total retail sales for the November-December period, or about $89 billion,” said Johnson. “Last year was a particularly strong Christmas-New Year’s week since Christmas fell on a Friday. So the Saturday and Sunday after made for ideal post-Christmas traffic.” Christmas to New Year’s week last year was about 15 percent of total season sales, Johnson said.
He sees holiday sales possibly exceeding his 4.1 percent forecast. The National Retail Federation is more conservative, projecting a 3.4 percent industry gain.
“Ever since the election, retailing has been steadily gathering momentum. Once the election ended, it opened up air time for retailers to advertise on TV,” said Johnson.
While retailers appear poised to meet seasonal sales goals, profit margins could fall short due to the all the early and extended promotions and deep discounting.
Retailers and analysts characterize Christmas 2016 as a season for hard goods, with home, electronics, and toys, particularly those related to Star Wars, Disney and Barbie, as well as Legos, drones, nerf guns and hatchimals, the best-performing categories. Best Buy, Apple, Home Depot and Lowe’s were said to be among the best-performing chains. Beauty was also strong, with Sephora and Ulta showing continued strength. Off-pricers T.J. Maxx, Ross Stores and Burlington Stores continued to gain market share, as did online operations across most of retail, and mobile selling.
On the other hand, fast-fashion retailing has simmered down; moderate-priced and upscale department stores and fashion specialty stores will generally post flattish or negative comparable sales, and most of apparel was weak during the season, though activewear, boots and dresses fared well. There’s still an excess of outerwear, although a pickup in coats and cold weather accessories has been seen post-Thanksgiving.
“If the outerwear 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,” said Johnson. “Some stores are putting 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….This is an especially acute problem for retailers/vendors in outerwear arena — unless you’re Canada Goose, which remains a hot brand.”
At the Mitchells Family of Stores, “We saw a huge surge at the end,” said Bob Mitchell, co-chief executive officer. In men’s wear, “Our core customer was shopping soup to nuts. So much at the end was about convenience.” In women’s, jewelry was the top seller, especially at Mario’s in the Pacific Northwest, and fur was also strong.
“In my centers, business was a little stronger than everybody expected,” said William Taubman, chief operating officer of Taubman Centers, of the season overall. The Mall at Shorts Hills, in New Jersey, was a standout, he said. “We just think people stayed closer to home, rather than going into the city,” partly to avoid the congestion in midtown around the Trump Tower. Aside from Short Hills, “There was good traffic all over the country. Florida is stabilizing and starting to improve.”
The Beverly Center, another Taubman property which is in Los Angeles, saw business in line with expectations, said Susan Vance, marketing and sponsorship director.
Sue Bahng, who operates four Ginger & Cream stores in Westwood, N.J. selling apparel, jewelry, shoes, home and gifts, said business this holiday matched last year’s. “Customers were doing a lot of stocking stuffers and a lot of what you’d call ‘secret Santa’ gifts. Even families were doing that. It makes it more fun.” In addition, “There were a lot of men coming in the last day buying gift certificates for significant others. The brave ones were putting outfits together. They like to wait till the last minute.”
“Everybody touted the fact that most retailers were leaner going into holiday. When you looked at the math, they were leaner, but it’s hard to tell where the inventory is,” said Charlie O’Shea, Moody’s lead retail analyst. “We’ll see who did what later on when the discounts go deeper. If a store is doing 60 percent off, then obviously 50 percent off didn’t work. If a retailer is doing just 30 percent off, then that means they’ve cleared a lot of their stuff and you know their planned promotions worked.”
Adobe reported out-of-stock items continued to rise on the days leading up to Christmas, with the greatest out-of-stock rates among lower-priced items and deep-discounted electronics. Many retailers have said that inventories are lower and more in line with sales trends this year, compared with last year.
O’Shea noted many specialty chains either offered one-day category sales or free shipping, which he said became another way of promoting. “Retailers built that into their discounting. Instead of offering 25 percent off, they offer 20 percent off and free shipping.”
Greg Portell, head of the retail practice at consulting firm A.T. Kearney, said, “It is fairly universally accepted that it’s been a good season for most retailers. That said, we’ll still see uneven results at the end in terms of who won and who lost.”
David Bassuk, managing director and co-head of retail practice at Alix Partners, concurred there was “good momentum” a few days just prior to the holiday. “Coming out of Christmas, it’s the consumer that has the chance to win,” with retailers unleashing clearances.
“There was a late surge of shopping and the federal holiday today [Monday] certainly contributes to the momentum,” said retail analyst Walter Loeb. “The weather has been conducive to shopping and people were shopping later and later.” With Super Saturday impacted by bad weather, Loeb said, “Many people postponed their shopping to the last minute.”
“This season has broken record after record with more shoppers going online to purchase their gifts than ever before,” said Rob Taylor, ceo of delivery service Convey. While this has led to a great season for sales, in the week before Christmas, one out of every five shoppers received packages late, and one out of 25 last-minute deliveries scheduled to arrive on or before Christmas Eve didn’t make their destinations in time, Taylor said. “Given the millions of packages in transit, this is actually a fairly impressive logistical feat for carriers. However, we know that 70 percent of shoppers won’t return after a single poor experience and 94 percent of shoppers will blame retailers when things go wrong.”
Retail analytics service DynamicAction studied $4 billion in online consumer transactions during the pre-Christmas weekends of 2015 and 2016, and found the biggest trend was a heightened reliance on promotions to inspire sales. For next year, the firm recommends retailers curtail the “profit-eroding discounting spiral” and provide better shopping experiences such as early access to new merchandise or curated collections.
The weather has been favorable to retailers. “We had the coldest run-up week to Christmas since 2013 in the U.S., with all regions of the country trending colder than last year,” said Evan Gold, executive vice president of Planalytics. “Chicago and Seattle had their coldest run-up to Christmas since 2008, Detroit since 2005, and New York City since 2012. Demand for cold weather categories were up anywhere from 10 to 30 percent nationally last week, with higher comps when you zoom in to the colder markets. In terms of store traffic, today [Monday] is expected to be in the top five for traffic, although not in terms of sales dollars. It’s an important day nonetheless.”
Marshal Cohen, chief economist for The NPD Group, underscored how important this week is for department stores. “They have the highest propensity for returns and for getting gift cards redeemed in their stores. It’s their chance to redeem their lousy November.”
He suggested that momentum at retail was increasing, with Super Saturday proving to be “a really great day” despite the bad weather and apparel picking up. “Pajamas, robes, sweaters, dresses and athletic footwear did very well in the strong finish. Some [retailers] were sold out of product, sizes and colors. Outerwear even fared well.” Still, Cohen said retailers relied on athletic styles and intimates, and showed a lack of innovation in apparel.
A last-minute rush helped the three-unit Rothman’s men’s chain achieve projections for single-digit gains for the season, according to president Ken Giddon. “It wasn’t a strong couple of weeks for tailored clothing but we sold a lot of outerwear and fun and whimsy things like socks, T-shirts and S’well bottles. People were looking for a little levity. I was very pleased,” Giddon said.
On Christmas Eve, Rothman’s flagship in Manhattan’s Flatiron district saw customers rush in for last-minute gifts to replace items that were purchased online and hadn’t arrived. He’s expecting his post-Christmas sales to be good and not heavily promotional. “We don’t have 30, 40, 50, 60, 70 percent off — that’s not our game. We try to buy right and give our customers a little incentive.” With holiday sales good, “there’s not much to move.”
“This week’s a very important week in L.A. for business,” said Kitson founder Fraser Ross, who operates the Los Angeles specialty boutique Kitross on Robertson Boulevard. “It always has been.…What we’re dealing with now in the new world is that people don’t have to buy clothing for Christmas gifts really anymore. It used to be we were getting rid of fall merchandise, but now you can buy anything and everything [at a discount] so you have to have the things that people are buying that match people’s personalities. We’re not buying a plain cashmere sweater as a gift.”
“We absolutely saw a last-minute push, which was the strongest we’ve seen in years,” said Mark Pan, U.S. country manager for the Cotton On Group. Pan reported that while top-line sales were slightly below expectations, the priority was gross margin improvement, which happened. “We were pleased to see sales come in ahead of last year and margins to improve,” Pan said. Traffic should rally again this week with up to 70 percent off sales, he said. That’s consistent with promotional activity for the same time last year for the company.
Craig Delongy, owner of the eight-unit John Craig men’s chain in Florida, said after a tough September and October, November was “great,” December was up 6 percent and margins improved 2 percent. “We didn’t take any markdowns.”
Despite warm weather before the holiday, he said the store sold woven shirts, sweaters and soft jackets, as well as dress shirts, neckwear and shoes, particularly Ferragamo, a relatively new addition. “Inventories are in good shape. We’re excited with the spring merchandise rolling in and markdowns will be minimal.”
HOLIDAY TRENDS
Revenues up; margins squeezed.
Large-screen TVs, Google Home, Amazon Echo, and games, gift cards, toys, jewelry and beauty were all strong.
Apparel was weak, with no one hot item. Exceptions: outerwear, boots, dresses, cold-shoulder tops, velvet, sneakers, track suits, sleepwear, leggings and whacky Christmas sweaters.
Online traffic was up; mall, and department store and luxury store traffic down.
Off-pricers, hard goods chains, and discounters sustained their momentum.
Black Friday, Cyber Monday and Super Saturday promotions stretched out days in advance.