New surveys by eMarketer and Thomson Reuters take different approaches to assess the holiday season for a range of retailers. Emarketer provided key metrics such as revenue, productivity and real estate for national nameplates, painting a clear picture of their performance.
Thomson Reuters, which reviewed promotional activity and discounts, estimated that about 60 percent of department store merchandise that was on sale last year will also be on sale this year at retailers such as Macy’s and Lord & Taylor, potentially further eroding profits.
Retailers are becoming more aggressive with the pace of their promotional messages, Thomson Reuters said, citing a 42 percent increase in messages over the last four weeks, with 12 percent more active promotions this season.
Department stores’ discount penetration dipped slightly from 66.7 percent last year to 60 percent this year. StyleSage, Thomson Reuters’ collaborator on the report, said more than half of all inventories in the department store sector are on sale.
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“That’s extremely high and the question is how long this sector can maintain these high discount levels, which come at the expense of margins,” StyleSage said. “The average discount hasn’t dropped much, from 26.8 percent last year to 24.1 percent this year.”
Emarketer’s report left no doubt that the 800 pound gorilla in the retail sector is still Amazon.
The digital behemoth is the undisputed e-commerce leader, with the largest share of U.S. e-commerce sales at 43.5 percent. The online giant grew revenue by 26 percent to $196.75 billion this year and now accounts for 3.9 percent of all retail sales in the U.S.
Emarketer expects total 2017 sales for the holiday period to rise 3.8 percent to $5.05 trillion, while e-commerce sales are projected to grow 15.8 percent to $452.76 billion, representing 9 percent of total retail sales.
The research firm expects a 38 percent leap in 2017 m-commerce to $156.3 billion in sales. Mobile this year will represent 34.5 percent of all e-commerce and 3.1 percent of all retail sales.
Emarketer compared store-based sales with e-commerce, and no surprise, the latter is growing at a faster rate than brick-and-mortar. Of Wal-Mart Stores Inc.’s $490 billion in total revenue for the 12 trailing months, physical retail contributed $463.4 billion, a 0.4 percent increase, while e-commerce sales surged 25 percent to $13.5 billion.
Target’s total 2017 revenue of $69.9 billion includes $66.3 billion in store sales, down 2.1 percent from 2016, and $3.5 billion in e-commerce sales, a 27.6 percent jump. Macy’s total revenue of $25.8 billion breaks out to $21.05 billion in brick-and-mortar sales, down 8.2 percent to $21.05 billion, while e-commerce grew 13.8 percent to $4.73 billion.
Kohl’s 2017 revenue of $18.5 billion consists of $15.4 billion store sales, down 4.6 percent, and $3.12 billion in e-commerce sales, up 14.7 percent. Out of Nordstrom’s $15.1 billion revenue, $11 billion is attributed to brick-and-mortar, down 1.9 percent, and $3.6 billion online, a 15 percent increase. Neiman Marcus’ $4.7 billion revenue saw store-based sales decline 7.9 percent to $3.23 billion, while online rose 2.5 percent to $1.5 billion.
Consumers’ insatiable appetite for discounts, especially when it comes to apparel, will benefit Ross Stores and TJX Cos. Inc. Thomson Reuters projected the former’s same-store sales will rise 2.5 percent, and the latter’s, 2.2 percent in the fourth quarter. In the negative column are Sears Holdings Corp., whose comps are expected to be down 10.5 percent; J.C. Penney, down 0.8 percent; Nordstrom, o.6 percent; Kohl’s, 0.3 percent, and Macy’s, flat.
Thomson Reuters’ holiday sales forecast is no gift for retailers. Overall sales are expected to be stronger than last year, with comps projected to grow 1.6 percent in the fourth quarter, but while that’s twice last year’s rate, it’s still below the 3 percent healthy mark, which points to modest spending.
Department stores in the fourth quarter are expected to post the biggest comp-store sales declines, 2.8 percent, while specialty stores, the highest positive increase, 3.2 percent. Discounters are expected to gain 2.7 percent gain and apparel retailers will advance 0.8 percent. Beauty concepts are outperforming most other categories. Take Ulta, whose same-store sales are estimated to rise 9,4 percent; Costco, 7.2 percent, Lululemon, 4.4 percent.
Those with the lowest same-store sales estimates in the fourth quarter include Francesca’s Holding Corp., down 6.6 percent; Michael Kors Holdings, 6.9 percent; Chico’s FAS, 7.1 percent; Guess Inc., 8.2 percent, and Sears, 10.5 percent.
The report’s earnings growth rate will seem like a lump of coal for the retail industry, especially the textiles, apparel and luxury goods group, seen declining 8 percent. Specialty retail and the Internet will be on the upswing, rising 6.5 percent and 13.8 percent, respectively.