Retailers are diehard optimists and this holiday season, they really did have something to feel good about — shoppers came out in droves eager to buy.
“People are spending more and buying more per transaction,” said Joe Cardamone, general manager of J.C. Penney at the Manhattan Mall on 33rd Street. “We don’t have a glut of inventory. We’ve been more focused.”
Across the board, retailers interviewed last weekend were bullish on holiday 2017 and agreeing with industry forecasts ranging from 3.6 to about 5 percent sales growth for the period, which are fueling optimism that the momentum carries into the first half of the new year. At the high-end, it could be the best holiday season since 2005, according to some retail experts. At worse, the season will come close to last year’s 4 percent average sales gain, as the National Retail Federation has reported.
On Super Saturday, which was the Saturday before Christmas, J.C. Penney’s along with Macy’s, Aéropostale, Zara, Victoria’s Secret and Uggs in the Herald Square area were teeming with shoppers. Nordstrom Rack, in Herald Square and Union Square on 14th Street, also were busy.
Up in Westport, Conn., shopping was similarly brisk. “This is going to wind up being a good season,” said Bob Mitchell, copresident of Mitchells Stores. “We’ll finish with a nice low-single-digit increase for the month. In this environment, positive numbers are a big victory.”
At Brooks Brothers, sales were better than expected. “Thanksgiving week was good, then there was a little lull, but the last five to seven days, consumers were out shopping and spirits were high,” Lou Amendola, chief merchandising officer, said Friday. Late December has been strong, rivaling a robust Thanksgiving period, he added.
At J. McLaughlin, “We will make our plan for our holiday season for a strong single-digit comp in stores,” said Kevin McLaughlin, cofounder and creative director. “The cadence of the business is shifting, from that last-minute rush at the register to making sure you get it done by maybe the 18th or 19th of December. The real crush around the 23rd is at UPS and FedEx,” with delivering online orders.
This past weekend, J. McLaughlin did 88 percent of its business at full price, McLaughlin said. “I’m thrilled with that. If you can offer strong value everyday and you have enough credibility behind the brand, you can get full price in a promotional atmosphere. But that full price is earned all year.”
“There’s no question people were out in the malls,” said William Taubman, chief operating officer of the Taubman Cos. “Traffic has been very good and sales were up but not as much as traffic. Overall, it’s been a very good year.”
Bal Harbour Shops in Florida typically gets more business in the week after Christmas than the week before, due to people on vacation through New Year’s and into January, flocking to Florida. “December was up, not hugely, but January will be hugely up and based on everything we have been seeing so far, we are hugely confident that this turned out to be a very good year,” said Matthew Whitman Lazenby, president and chief executive officer of Whitman Family Development LLC, which owns and operates Bal Harbour Shops.
“Our experience tells us that the week between Christmas and New Year is our busiest week of the year, both in terms of traffic and in sales,” said Jill Renslow, senior vice president of business development and marketing at Mall of America. “It is clear that our retailers are preparing for that week by increasing staffing, inventory and advertising great deals.”
The Craig Realty Group has seen its 15 centers in nine states exceeding expectations for the season, said president and ceo Steven Craig, who cited Craig Realty’s Outlets at San Clemente in Orange County and The Citadel Outlets in Los Angeles as particularly strong. He credited better planning, social media and consumer sentiment for improved business. “People are making more money and they feel wealthier. People’s 401ks are richer and there’s just a lot of optimism. Certainly on the West Coast wages are up substantially….I don’t think the dire predictions of, ‘Oh, all the malls are going to be gone’ is going to happen based on what I’ve seen. If you provide value, a good experience, and the selection of brands, people are very much as interested in shopping as they were years and years ago. I think we’ll have record crowds at probably every one of our properties this year,” he said.
“The A malls and power centers had the best traffic,” said analyst Janet Kloppenburg, of JJK Research Associates. adding that Super Saturday was “pretty good and built throughout the day.”
Retailers Tracking Decent Gains
“The numbers are very encouraging for the holiday season. There’s certainly strong consumer demand for many sectors,” said Jack Kleinhenz, chief economist for the National Retail Federation. “Retailers and consumers were in sync,” Kleinhenz said, meaning retailers ran the right promotions when consumers were looking for them. “Retailers were not in catch-up mode.”
He said when retailers report their December and fourth-quarter numbers, he expects they will on average match the NRF forecast months ago that holiday sales would be up 3.6 percent to 4 percent.
The holiday rally could continue this week with shoppers back in stores to make returns, exchange gifts and redeem gift cards. There’s also an opportunity for retailers to sell early spring goods at full price, while the bitter cold weather expected to move through much of the country this week, with the exception of the Southwest, is expected to spur sales of leftover coats and cold weather gear.
“Spring goods are checking already,” said James Von Maur, president of the Davenport, Iowa-based Von Maur department store chain, where about 20 percent of the selling floor currently displays spring goods. “We are very upbeat. We’re feeling much better than last year. We still have Christmas stuff out there to clear, but I have no concerns about getting through it. Our inventory is clean. Super Saturday was big. We made up a lot of ground and our post-Christmas business gets a little better every year.”
Rick Kenney, head of consumer insights at Salesforce Commerce Cloud, believes that post-Christmas, shoppers will go mobile at an unprecedented rate. “On Boxing Day, Dec. 26, phones are expected to account for 65 percent of traffic,” Kenney said, adding that the jump in mobile traffic and order rates will continue into 2018. “We also expect to see discount rates creep back up again for the remainder of the week, as shoppers head back to the mall to make returns.”
Industry sources said markdowns and price promoting were no steeper than last year. “They seem pretty flat year-over-year,” said John Berg, ceo of Financo LLC. “Retailers spent more time planning their markdowns and building the cost structure so the profit outlook is better.”
Wealth Effect, Weather Work for Stores
In part, the outlook is up because last year was so weak, making comparisons easier. But retailers have been buoyed by Congress passing the tax cut bill backed by President Trump, fueling consumer confidence, which had been already high. With the economy at almost full employment, there have also been some wage gains, moderate inflation, some pent-up demand for fashion, the wealth effect from home and equity price increases, and technology has enhanced online shopping and services for shoppers, so they have greater options on how, where and when they can shop.
“It all enters into the algorithm for spending,” Kleinhenz said.
“If you look at the consumer confidence index, it has been elevated since a year ago,” he explained. “We’ve also seen the savings rate go down. People are not as concerned about the economy as much. Their investments have gained. Consumers have been using their credit cards more and outstanding balances are up on a year-to-year basis.”
Even the weather has been kind to retailers, providing “a tailwind for businesses,” said Evan Gold, executive vice president, global services, Planalytics.
“The holidays started with a dry Black Friday weekend that was ideal for foot traffic,” Gold said. “Moving through December, there were periods of cold conditions as well as some light snow in major markets. These conditions not only helped get consumers into a holiday mind-set, they also drove demand for seasonal apparel, putting categories such as boots, jackets and gloves into shopping baskets.” The rain on Super Saturday, “for most was a nuisance and did not deter any last-minute shopping,” Gold said.
In the lead-up to Christmas, e-commerce purveyors aimed to carry Black Friday and Cyber Monday’s record-breaking momentum forward using a variety of tactics. Amazon appealed to procrastinators by offering same-day delivery up to 9:30 a.m. on Dec. 24, and Amazon Prime Now customers got up to 9 p.m. on Dec. 24 for free two-hour delivery.
Best Buy, Macy’s and Wal-Mart took on Amazon with a mix of shipping promises and by providing pickups at brick-and-mortar locations. Wal-Mart tripled its online inventory from a year ago, and for the first time offered free two-day shipping with any $35 order. The mass merchant also held in-store holiday parties.
“Between shipping costs and reliability, brick-and-mortar stores get the edge as we near the holiday,” said Marshal Cohen, chief industry analyst at NPD Group. “Trusting a site to deliver on time is growing harder and harder each year.”
“While Amazon remains a dominant force in the e-commerce landscape, its meteoric growth hasn’t come at the expense of [small to mid-size businesses] and niche brands,” explained Brent Bellm, ceo of BigCommerce, an e-commerce platform that creates online stores for small to large businesses.
At social shopping network ShopStyle, “the top converting product across all our retailers and brands was a two-person ugly sweater similar to the styles worn by Prince William and Kate Middleton in their ugly Christmas family photo,” said a spokeswoman. “Knee-high boots continued to trend, with styles from Frye and Born leading the pack. In addition, ath-leisure continues to dominate with moto leggings and high-end sweatshirts.”
ShopStyle noted gains for luxury sales, but the greatest growth was from mass retailers. “We anticipate a spike in shopping, as many big retailers start their major year-end sales after the holiday,” she added.
According to Bellm, since Thanksgiving, gross merchandise volume for those businesses increased 21 percent year-over-year.
But discounts are the bread and butter of holiday e-commerce. And in the days just before Christmas, promotions were set to accelerate, said Rick Kenney, head of consumer insights at Salesforce Commerce Cloud. In the Dec. 19-21 period, retailers raised discounts by 23 percent, he said, leading to 50 to 60 percent off or higher in many cases.
“Retailers are kicking up their end-of-season promotions in an attempt to lure back fatigued shoppers,” Kenney explained. “The days leading up to Christmas, from Dec. 19 to Dec. 21, saw one final push from retailers who raised discounts to 23 percent, an increase of 36 percent from the same period in 2016.”
Bestsellers Seen Across Categories
For multibrand e-tailer Revolve, business has continued ahead of plan for December driven by knits from Lovers + Friends, Revolve Beauty Boxes, faux fur coats, and sequin and velvet minidresses, said cofounder and co-ceo Mike Karanikolas. “Consumers are increasingly turned off by mass brands and brands that are always on sale, which has led to really strong growth in our full price and emerging designer business,” he said.
“Post-Christmas, we expect strong sales to continue through year-end with seasonal markdowns maintaining last year levels to support year-end clean up of inventories,” said Rob Trauber, ceo of Johnny Was, the L.A. retailer with 28 units.
Los Angeles vintage-inspired brand Wildfox Couture — with three stores and a web site, is hopeful the momentum continues following a season of shoppers who spent as much on gifts as on items for themselves, said Wildfox founder and ceo Jimmy Sommers. “Our expectations are high,” he said of this week.
Santa Monica, Calif., online designer resale platform Tradesy beat expectations for the holiday. Unlike traditional retailers, Tradesy will see traffic rise in the first quarter as members selling gifts, wanting new wardrobes or with New Year’s resolutions to clean out their closets flock to the site. “Historically for us, Q1 is actually our best quarter,” said founder and ceo Tracy DiNunzio. Also, the resell trend is growing.
Cardamone characterized J.C. Penney’s holiday assortment as gift-oriented and centered on electronics, including stocking stuffers filled with such items as iPhone chargers and coffee mugs. Fine jewelry including diamonds and smartwatches; beauty items from Sephora; gift cards; $19.99 boots; activewear from Nike and J.C. Penney’s in-house Xersion line; Lego, Playmobile and virtual reality goggles in toys and tech, and dresses, mostly under $60, were bestsellers.
The 43-year veteran of J.C. Penney’s said Super Saturday would be the store’s second-biggest volume day of the year. “Black Friday is always our largest day,” Cardamone said.
Brooks Brothers decided before the holiday to hold back on promotions until its semiannual sale kicks off Dec. 26. It didn’t deter business. “The few things that were being promoted didn’t do any better than the non-promotional items,” Amendola said. “If the consumer thinks it’s a fair price, they’ll purchase it. They don’t need a discount.” Top sellers have been “traditional gift-giving items” such as sweaters and shirts.
“We won’t change our plan to be aggressive,” Amendola said. “The last few years have taught us to be conservative, but with big companies adding jobs and the minimum wage going up, we hope that will continue to stimulate the economy and make people get out and shop. Traditionally, the Christmas season translates into what will happen in the next six months, so we’re optimistic.”
Ken Giddon, president of Rothmans, was similarly upbeat on the season. “I was actually surprised at how strong it was. We were expecting to give something back since October and November were so good, but we’re still plugging along in December.” His three stores were not promotional. People paid full price. Sport coats, dress slacks, knitwear, jeans and outerwear were among the bestsellers, but suits weren’t great.
Giddon believes sales will remain strong in the new year. “I think 2018 will be the year of the independent retailer,” he predicted.
Mitchells’ eight stores ran no promotions but that didn’t stop customers from shopping, particularly for men’s sportswear, which posted double-digit gains. Top brands included Brunello Cucinelli and Ermenegildo Zegna. “Tailored clothing was better than expected although shirts and ties are still a challenge,” Mitchell said. “But we sold lots of sneakers and boots.” Women’s accessories and jewelry were also top sellers, he added.
“Online sales are strong, but the luxury customer still wants the personal touch in stores,” he said. “I’ve personally been on the floor, servicing customers and seeing clients. They’re feeling better.”
“For Super Saturday, traffic was slower in the morning but brisk all afternoon,” said Lisa Walters, principal at Retail Eye research firm, which checked out 12 markets on Thursday, Friday and Saturday. “In areas of the Northeast/mid-Atlantic the rain seemed to push shoppers to make trips later in the day. We saw shoppers continuing to make smaller last-minute purchases — jewelry, fragrance/beauty, small leather goods, candy/consumables, consumer electronics, smaller stocking stuffer type items.
“At the mall, we saw high shopper browsing and purchasing at Pink and Victoria’s Secret, Bath & Body Works, Pandora, Williams-Sonoma, Macy’s, Nordstrom, Uggs and Lululemon. Off mall, Dick’s Sporting Goods, Five Below and Ulta were standouts. Promotions remained high throughout the holiday season and into this final week with most retailers running at or slightly above last year’s levels,” Walters said. “That said, we saw many take a step down in discounting from the prior weekend. Into the final week of the month, inventories look in good shape for the majority of retailers. I think we’ll see robust shopper turnout in week five as shoppers come in to use gift cards and make returns. This should hopefully put winter/holiday inventories into lean positions ahead of first spring sets and translate to significantly lower clearance levels in January to last year.”
Simeon Siegel, an analyst at Instinet, said, “It seems the combination of disciplined inventory entering the season, coupled with better weather coupled with perhaps some hope around taxes have made the holiday much more controlled and that helps the retailers.”
Gabriella Santaniello, founder of consulting firm A Line Partners, has been visiting malls since Friday. “I saw good solid traffic and have been getting good feedback from the stores. Inventories were pretty low across the board and a lot of stores are selling out of stuff.” She observed long lines at the stores since Friday, with parking spots at malls hard to find.
Santaniello said teen retailing, a sector that has been pressured for the past two years, “look really good.” While American Eagle Outfitters is cited as the standout, Abercrombie & Fitch seemed to be faring well, too. “I like Hollister the most. Product-wise, they’ve done a phenomenal job. At Abercrombie, they’re not yet firing on all cylinders, but there’s not a lot of [excess] inventory. They’ve done a good job at planning and matching inventory levels with traffic expectations.”
Key Holiday Trends
• Fine jewelry, beauty, fragrance, boots, cold-weather accessories, activewear, dresses, sweaters, smartwatches, Lego, wide-screen TVs, gift cards rank as bestsellers.
• Mobile shopping and order-online, pickup-in-store is increasingly popular.
• Retail inventories under control; markdowns on par with a year ago.
• Major sales no longer one-day events. Black Friday and Cyber Monday deals extended, leading to less procrastination and last-minute shopping.
• Consumers feel confident and shopping more, potentially lifting retailers to best holiday season since 2005.