‘So far, so Good’ as Retailers Report Holiday Selling Meeting Expectations
WWD
By: David Moin with contributions from Sharon Edelson, Jean E. Palmieri, Kari Hamanaka, Allison Collins, Vicki M. Young
Colder weather, healthy consumer wallets, accelerating online activity and a renewed interest in apparel are buttressing the season.
After a Thanksgiving weekend marked by strong online activity and a proliferation of pre-planned price promotions generally 25 to 50 percent off, retailers believe they’re on track to meet holiday goals.
Apparel and cold weather accessories; sweaters; electronics including TVs, iPhones and audio gear; fine jewelry; beauty, and toys, including video games and Lego, have been standouts so far.
Among the busiest stores of the last four days were Kohl’s, Dick’s Sporting Goods, Target, Sephora, Walmart, Macy’s, Home Depot, Lowe’s, Old Navy, Apple, Best Buy, Lululemon, Hollister, Aerie and American Eagle, according to retail sources.
“Black Friday is still the best shopping day of the year and this year was no exception for Walmart,” Steve Bratspies, chief merchandising officer of Walmart U.S., said in a post Thursday night. “Traffic was steady all night long in stores across the country.”
Walmart bought particularly deep on smart phones, toys, gaming consoles, cookware and TVs, among other items, and Walmart.com launched deals at 10 p.m. Thursday, two hours earlier than previous years.
“It’s been good, but Black Friday is just the start of the holiday season,” Jeff Gennette, chairman and chief executive officer of Macy’s Inc., told WWD on Friday morning, referring to online and store traffic. “There are a number of our stores where we do actual traffic counts,” Gennette said. “So far, so good.”
While some retailers started promoting Christmas gifts right after Halloween, Gennette sees the bulk of the holiday season “compressed between Black Friday and Christmas. That’s really the season.”
“We saw solid increases on Black Friday and for the total week. We feel positive moving into December,” Mary Ellen Coyne, ceo of J.McLaughlin, said. “We had bigger increases on Saturday than we planned and our most significant growth was in full-price sales across the weekend. We are a brand that doesn’t promote very often. We are driving full price. Markdowns represent roughly a third of what we do. Our best-selling styles are classic with modern updates. Our number-one sellers are classic black Tripp sweater jackets and cashmere crewneck sweaters with a subtle ruffle at the edge and sleeves. Our move to faux fur has been extremely well received.”
In a statement Sunday afternoon, the Hudson’s Bay Co. said it was “pleased with the response to the weekend so far. At Lord & Taylor, shoppers are purchasing more per visit.” Cashmere, shoes and outerwear were cited.
“Saks Off 5th stores and online were both strong, with key category drivers being outerwear, cashmere, cold weather accessories, as well as boots online,” HBC said. “Additionally, we continue to see a rise in mobile shoppers as part of the growth to e-com this weekend. In Canada, we also see mobile rising within digital — very strong traffic online and in-store, with significant growth over last year.” Hudson’s Bay stores did best in women’s and men’s apparel, and online in shoes and housewares. Saks Fifth Avenue also saw “a strong response over the weekend,” the group said.
So did the Disney Store, which saw a “significant Black Friday turnout” at locations across the country and online, said Ken Potrock, president of consumer products commercialization. Top-selling items in stores and online were Talking Buzz and Woody action figures, Belle tea sets and Minnie Mouse cooking sets. The best categories were talking action figures, plush stuffed animals, classic dolls, ornaments, family sleepwear and princess costumes.
At Talbots on Black Friday, “Our customers showed up in force and with strong purchase intent and we delivered on her expectations, which drove high conversions across the board,” said Lizanne Kindler, ceo. Talbots, which has a total of 551 regular-priced stores and outlets, “saw strong performance across the country and across all types of real estate locations,” Kindler said, citing outerwear, cold weather accessories, novelty holiday-themed sweaters and down puffer vests with faux fur collars being customer favorites.
“We are excited about the momentum we have as we head into the rest of the holiday season,” Kindler said.
Lou Amendola, chief merchandising officer of Brooks Brothers, said Black Friday’s business was up single digits and on plan. Unlike the last few years where increases were primarily online, “People are out and about and traffic in the stores is better. It seems to be more balanced.” Outlets were especially strong, he added.
“This was a four-star weekend — maybe not a five-star weekend,” said Craig Johnson, president of Customer Growth Partners. “Thanksgiving evening was a superstar. There was so much demand pulled forward from Saturday and Sunday. Saturday was no different from a regular weekend.” He said U.S. sales, excluding autos, gas and restaurants, would reach $60 billion for the four-day period, versus $57 billion last year.
“Everything we are seeing is on track with our forecast of 5.1 percent for year-over-year growth,” said Johnson.
“We’re feeling very good about the holiday season overall,” said PacSun president Alfred Chang. “PacSun has seen really good strength in the business this year and it’s been continuing.” Executives said the Anaheim, Calif.-based retailer saw lines of 50 to 100 people outside its doors Thursday evening. They were attracted to promotions on denim and exclusive products.
“The strength of our online business has been phenomenal. We’re continuing to see growth and record contributions from online to our total business,” said Cotton On U.S. general manager Mark Pan. “We’ll continue to read the business and how our lines perform relative to our expectations and be really targeted with our promotions, but we don’t expect the need to do storewide discounts.”
At Zulily, based out of Seattle, chief marketing officer Kevin Saliba said, “We’re seeing more customers shopping on mobile devices than we have before.” Mobile penetration is more than 72 percent, with the retailer seeing strong sales of toys and women’s merchandise last weekend.
Jet.com saw traction on Black Friday in toys and electronics, specifically Lego, Apple, Google Home devices and other connected home devices such as Roku and Linksys.
Kohl’s reported record sales online on Thanksgiving Day, selling 60 Instant Pots per minute. About 80 percent of online traffic came from mobile devices, and more shoppers opted to buy online and pick up in stores.
BUMPS AHEAD?
Beyond the widespread optimism, there’s an undercurrent of concern, however. There are still five weeks left to the season and uncertainty surrounding the stock market, inflation and politics could all potentially sway the consumer. As Amendola said, “I’m still cautious. Over the past few years, we’ve seen that the consumer can change quickly and that could impact the next couple of weeks.”
“In general, things are still choppy. There doesn’t seem to be a rhyme or reason to it, but we’re still getting increases,” said Bob Mitchell, co-ceo of Mitchells Stores, citing mid-single digit growth at his company.
“There’s really no way of predicting with the mood of the country the way it is right now with the stock market and the political situation. There’s too much volatility to say whether it will be a great season,” said Ken Giddon, president of the New York City-owned Rothman’s men’s stores. That being said, Rothman’s business is ahead of last year at both the Union Square flagship as well as its Westchester stores and Giddon expects a good season. “Pre-Black Friday was very strong, too, even though we’re not down and dirty like the big stores,” said Giddon.
With the results pouring in, industry experts are sticking to their predictions of mid-single-digit Christmas gains based on low unemployment and consumers staying steadfast in their tendency this year to spend more. They’ve been lifted by tax cuts and low gas prices which have been dropping since last October’s high. Last week’s Arctic blast of cold weather also spurred the apparel business. An estimated 164 million Americans will have been shopping Thanksgiving Day through Cyber Monday, according to the National Retail Federation.
Experts have said that fourth-quarter profit margins will be hurt by rising delivery, labor costs and costs from omni-channel advancements providing shoppers with greater options on how, when and where they can shop and receive their purchases, which helped trigger last week’s massive fall in retail share prices. Merchandise margins should be OK because inventories have been well managed. Nobody is pushing the panic button yet.
Still, certain tech companies and real estate executives told WWD that the crowds for the Thanksgiving/Black Friday weekend were smaller this year. “The monumental crowds that the big boxes had been generating have significantly decreased,” said a senior executive from a real estate investment trust. “But in the better malls particularly, this is the strongest weekend traffic we’ve ever had. It’s a more complex picture.”
“Some stores had to do crowd control on Black Friday,” said Gabriella Santaniello, founder of retail research firm A-Line Partners. But she agreed with others that Saturday’s traffic was much lighter. Her big takeaway: apparel retailers could win the season. “We are in the early stages of a shift in the silhouette, such as highlighting the waistline. Women are beginning to shift their wardrobe and adding items to renew their closets.” Athletic shoes and “giftable” small leather goods should sell well, but “I don’t think people are looking at handbags this season,” she said.
Cyber Monday is expected to be robust, both online and at brick-and-mortar stores, which will promote vigorously to keep up with the online activity. But plenty of Cyber Monday sales were staged last week, which will certainly take some steam out of the actual day.
The RealReal said Gucci, Cartier, Rolex, Celine, Missoni, Versace, Virgil Abloh’s Off White, Balenciaga, Prada, Phoebe Philo’s Celine, Rosetta Getty, Gabriela Hearst as well as emerging designers such as Faris, Charlotte Chesnais, Wwake, Foundrae and CVC Stones saw strong demand. Searches of sneakers rose 31 percent at Gucci, Balenciaga and Louis Vuitton. Come Tuesday, the retail lull sets in. It typically lasts until around 10 days before Christmas, though a temporary pickup could occur next weekend, sources said.
RetailNext, which monitors store traffic, reported that for Thanksgiving and Black Friday, brick-and-mortar sales dropped 4 to 7 percent year-over-year and shopper traffic declined 5 to 9 percent. However, “Sales were buoyed, in part, due to increases in conversion of between 0.3 to 0.8 percent, resulting in increases of approximately 3 percent in both average transaction value and shopper yield/sales per shopper. RetailNext continues to expect retailers to benefit from a general growth of 4.5 percent over the holiday season. With gigantic gains online Thanksgiving and early on Black Friday — firmly into the 20 percent range — physical retail will post lower numbers. Therefore, it’s important to look at retail results from a holistic, enterprise-wide perspective.”
Moody’s Investors Service projects holiday sales up 5 to 6 percent. “There’s a lot of juice in the short-term going into holiday. Employment is good, there are tailwinds for strong momentum through the holidays, and an extra [shopping] week this year since Thanksgiving was early,” said Charlie O’Shea, lead retail analyst.
Not wishing to sound overly optimistic, O’Shea noted the season is still early and consumers always believe the best deals are on the Saturday before Christmas. “While there’s the risk the item may be gone, if consumers believe it will be priced lower later, they may choose to take the risk and wait to buy.”
According to Evan Gold, executive vice president at Planalytics, which forecasts the weather and helps retailers plan accordingly, the Thanksgiving/Black Friday weekend saw cold conditions in most of the U.S., providing “an ideal start to the holiday shopping season.” Most markets were up to 15 degrees colder than last year, Gold observed, driving demand up 19 to 20 percent on coats and cold weather accessories; boots up 13 percent, and coffee, up 2 percent.
Leading shopping destinations, at least, didn’t have difficulty attracting crowds. On Friday, Woodbury Common in Harriman, N.Y., among the largest outlet centers in the U.S., saw lines outside such brands as Tory Burch, Nike, Moncler, Uggs, Gucci, Cole Haan and Burberry. Shoppers waited in the cold to take advantage of strong Black Friday deals. Theory offered everything at 60 percent off; Joe’s offered 50 percent off, and Coach was up to 70 percent off. Lines at cash registers were long, the parking lot was packed, and the food court overflowed with diners.
South Coast Plaza in Costa Mesa, Calif., saw strong traffic over the weekend, setting itself up for a record year, according to Anton Segerstrom, a partner in the center. “I’ve noticed especially this year that a lot of the retailers are starting sales as early as Tuesday” before Thanksgiving, Segerstrom said. “In year’s past, everybody concentrated on one small time frame and now they’re beginning to spread it out, which is pretty smart. It takes pressure off the consumer. The business is there so I think for our center, the time of these midnight madness sales or whatever you want to call them where people are here at crazy hours, is starting to even out a little more and people are coming at more normal times.”
“In previous years, there were a lot of lookers. This year more people are shopping and buying,” said Greg Maloney, ceo of JLL Retail, which manages about 1,000 properties. “We go around asking the retailers how they are doing. We don’t count cars or people. We just look at results. Of the retailers at the 77 properties we surveyed, 86 percent said they had moderate sales, meaning the same as last year or slightly up, or they said they had strong sales.” Apparel, including shoes and accessories, and electronics were the two strongest categories, Maloney said. “People are looking to spend between 7 to 15 percent more than last year,” Maloney said.
“The winner here is the consumer. Look at how many shopping options they have,” he said, referring to retailers implementing omni channel operations.
“Consumers have a bit more money so this could be a really strong indication that Christmas will be great,” said Steven Craig, president and ceo of Craig Realty Group, the owner and operator of 15 shopping centers in the West. “I’m noticing a greater number of bags per person. I ran into a woman shopping for Christmas gifts and in the meantime she bought two bags for herself. They were Kate Spade, and she goes, ‘I can’t live without that.’”
CBL Properties, a large REIT and the largest owner and manager of shopping centers in the Southeast, kept its centers closed Thanksgiving and reopened them at 6 a.m. Friday. “All the reports we’ve been hearing are very encouraging,” said ceo Stephen D. Lebovitz. “We had people lining up as early 1:30 a.m. For us, it’s more specialty stores such as Victoria’s Secret, Pink and Bath & Body Works, which all had really exciting items selling early. Cosmetics was strong with Ulta and Sephora. Aerie is doing really well, and we’ve heard that Macy’s had strong traffic.
“It’s a strong economy and there are a lot of tailwinds with wage growth, low unemployment and low gas prices. The consumer is in a good position,” he added.
“Ulta Beauty kicked off the holiday season with two exciting launches — Kylie Cosmetics and the Morphe x James Charles Palette. We are pleased with the initial results,” said Dave Kimbell, chief merchandising and marketing officer. “We [had] a great lineup of offerings for Black Friday that are working well, including a compelling range of limited-time Black Friday Beauty Busters and our Ulta Beauty Collection Blockbusters.”
Sephora was promoting deals at $15 and under for Black Friday and its “weekly wow” offerings.
At Macy’s beauty operations, customers focused on gifts and self-purchases, a spokesperson said. The department store saw strength in sales of lipstick and fragrance sets, and offered promotions on items including a Macy’s Beauty Collection mini travel brush set for $10, to more luxury items, like Foreo devices, at 25 to 35 percent off.
At e-tailer FeelUnique, shoppers were drawn toward high-end items, like Chanel and Dior fragrance. “Some of the full-priced products are actually selling really well,” said Nigel Lawmon, commercial director. “The new Huda Beauty Nude Palette is our number-one bestseller right now and that’s not discounted.”
Ironically for FeelUnique, Cyber Monday isn’t as big as Black Friday, the company’s largest volume day. “It used to be much more about Cyber Monday but year after year, Black Friday just keeps getting bigger,” Lawmon said.
At luxury retailer Cos Bar, which rarely runs promotions, Black Friday store traffic rose 10 percent, with the average ticket up 20 percent and average units per sale up 7 percent, according to ceo David Olsen. Overall, Black Friday was up 30 percent. The store promoted a $40 Cos Bar gift card for spending $200. “The customer will come back and shop or redeem or give it to a friend as a gift to shop in December and January,” Olsen said.