Wildly promotional? It’s practically a sure bet that will be the tenor of the second half based on the relentless discounting of the past several holiday seasons. It’s what shoppers expect and retailers can’t wean themselves away from it.
Still, over the last few weeks as the quarterly data was posted, retailers signaled that they will come out of the back half of the year in good shape, based on business picking up in the second quarter, controlled inventories, continued integrations between online and brick-and-mortar operations and low unemployment. Wild cards that could disrupt the back half include flare ups with North Korea, findings from special counsel Robert Mueller’s investigation into the Trump campaign’s possible ties to Russia, a derailing of the Republican agenda for tax cuts, Wall Street volatility and an act of terrorism.
Poised to do well in the second half are Home Depot, Costco, TJX and Ross, which are already doing well, as is Old Navy and Wal-Mart, which has been setting itself up for a strong performance with its Jet.com, Moosejaw and Bonobos acquisitions. Apparel specialty is still limping along for the most part and is not expected to pick up anytime soon.
Department stores, which have been beset by necessary store closings, Internet competition and inconsistent shopper traffic, have been upbeat about the second half. “Macy’s results for the second quarter were in line with our expectations, and we are on track to meet 2017 sales and earnings guidance,” said Jeff Gennette, president and chief executive officer.
“We anticipate that the marketplace will remain very promotional,” said Marvin Ellison, J.C. Penney’s chairman and ceo. “There may be some accelerated promotional activity in the second half of the year versus what we’ve traditionally seen, but we are prepared for that. It is built into our earnings guidance, and even with that, we are very confident that we will meet our earnings guidance for the second half of the year in the face of what we think will be a slightly more promotional environment.”
A week ago, National Retail Federation chief economist Jack Kleinhenz summed up the situation. “Consumer spending remains solid as retail sales saw healthy improvements in July and revised June numbers were also positive. We have yet to see the full effect of back-to-school spending, but a pickup in spending was evident both online and in general merchandise, which includes bricks-and-mortar department stores. Rising home values are encouraging home-improvement spending and home-related retail purchases.”