Being the biggest sales season of the year, holiday buying has always provided the much needed boost to the fourth quarter results of every retailer in the past. For some retailers the holiday season can represent anywhere between 25-35 per cent of the total annual sales. This holiday season the US retailers drove a 2.7 per cent increase in sales due to promotions and discounts despite six fewer days and the cold weather conditions that kept shoppers away from stores, according to the retail industry tracker ShopperTrak. This increase reflected a reviving economy as retail sales between Thanksgiving and Christmas rose for the fourth consecutive year, even though the people walking into the stores fell by 14.6 per cent during this period.
As retailers had only 25 days to woo shoppers last year, compared to 31 days a year earlier, this difference prompted various stores to come out with their offers and promotions earlier than usual. “A shortened holiday shopping season, coupled with the most promotional retailing environment in five years, sluggish consumer spending, stagnant wage growth, multiple winter storms and a shift towards big ticket durables put intense pressure on retail margins and led to uninspiring holiday sales results,” declared Ken Perkins, President, Retail Metrics, a research firm. Though the economy is performing well in the recent months and employment is currently on the rise, but the fact remains that the consumer’s purchasing power is still restricted. Evidently the retailers gained through heavy discounting and promotions to entice consumers to part away with their income, but these discounts have weighed heavily on the margins of some of the retailers.
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- “Tiffany enjoyed a good holiday season with overall sales results in line with our expectation, and we were pleased to see growth across our fine and statement, engagement and fashion jewellery categories.”
Michael J. Kowalski Chief Executive, Tiffany
- A report from analytics firm Custora found that e-commerce sales in November and December grew 12%, with mobile sales booming 50% calling online shopping “the shining star in a lukewarm holiday retail environment.”
[/bleft]Many large US retailers slashed their earnings forecasts due to steep discounts they offered during the holidays to persuade reluctant consumers. Major retailers such as L Brands cut its holiday quarter profit forecast due to disappointing December sales at its Victoria Secret and La Senza chains. Victoria’s Secret parent L Brands and home decor chain Pier 1 Imports joined other retailers in slashing profit forecasts following disappointing holiday sales. The reason behind this was heavy discounting, higher marketing costs and poor weather over the late November to December gift buying season in the United States. Although the discounts offered not only boosted overall industry sales but also hurt profits at many other stores including Zumiez Inc., Walmart, Target, Sears, Cato Corp, Sainsbury’s, M&S, Tesco, American Eagle Outfitters Inc, Bed, Bath & Beyond, Family Dollar, etc. “The discounts needed to be deeper and they needed to be longer,” said Joel Bines, Managing Director, AlixPartners, a consulting firm.
But there seems to be a few winners during this holiday season, the likes of which include warehouse club chain Costco Wholesale Corp which reported a 5 per cent gain in US same-store sales for December. While Gap rose 1.9 in post-market trade after it reported a 1 per cent rise in comparable store sales for the holiday shopping period, also Macy’s soared 7.6 per cent higher after confirming its 2013 earnings forecast following a ‘successful’ holiday shopping season. Nonetheless the good news came with a few bad ones as Macy’s announced plans to cut 2,500 jobs in a reorganization strategy. “Our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s. We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope. As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers,” informed Terry Lundgren, Chairman, President and Chief Executive Officer, Macy’s.
Meanwhile, winter storms and icy weather throughout December hurt store traffic and curtailed store hours. This resulted in shoppers going online to make purchases which led to the US online retail spend to increase 10 per cent to US $ 46.5 billion during the period from November-December 2013 according to comScore, an American Internet analytics company. This also led to the number of customers in stores to drop to 14.6 per cent from last years for November and December combined. Though online shopping has been a bright spot for retail sales, and growing at a fast rate, the results were below expectation primarily because of the six fewer shopping days, due to the late American Thanksgiving. According to comScore Chairman Gian Fulgoni, “Consumers did not have the same opportunity to buy that they would have in a more typical holiday season.”
A last-minute shopping surge helped US holiday sales wrap up better than expected, but stores had to discount heavily to lure shoppers. After a decent performance in November, sales at stores had been weak for most of December as shoppers held back for the best deals in a still recovering economy. Though merchants had been aggressive with discounting as early as late October, but many stepped up price-cutting more than planned in the finals, days before Christmas. “It was a lacklustre season, but not devastating as stores had to go into deep discounting after the softness they saw,” told Bill Martin, Co-Founder, ShopperTrak. In fact, the week ending Dec. 28 accounted for 15.5 per cent of sales and 16 per cent of all traffic for the holiday season, which compared with 10.9 per cent of last year’s holiday season sales and 11.5 per cent of last year’s traffic. So far the holiday season retail sales have been mixed as some retailers posted profits during the period with some losses. Though the average shopper spent less on the weekend including Black Friday, according to the National Retail Federation data the overall retail sales saw a boost during this period, nonetheless limited by few shopping days and the unexpected snowstorms.
