Retailers Transcend Headwinds – WWD
Retailers are on a high. The question is, for how long?
Reports over the last four days indicate retailers emerged from the 2021 holiday season with sales gains of between 8 and 10 percent, and healthy fourth-quarter profits based on extensive full-price selling and well-managed inventories.
A more precise picture of the season’s outcome will show up in February and March when retailers issue fourth-quarter and year-end figures. For now, they’re sounding quite pleased at their performances against the combined impact of COVID-19, supply chain delays, labor shortages, inflation and stockouts, and are optimistic heading into the new year. They’re hopeful the headwinds encountered in 2021 won’t be as acute in 2022 and that consumer demand will remain high, while concerned about anniversary-ing government stimulus checks, that comparisons to 2021 results will be tough, and that COVID-19 remains a big wild card as the Omicron variant causes case numbers to soar once again.
On Sunday, Mastercard reported that 2021 U.S. holiday retail sales, excluding automotive, increased 8.5 percent year-over-year this season. Online sales grew 11 percent compared to the same period last year, Mastercard’s preliminary insights showed. The Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment and defines the holiday season as Nov. 1 through Dec. 24, though many retailers triggered holiday campaigns in October this year.
“Shoppers were eager to secure their gifts ahead of the retail rush, with conversations surrounding supply chain and labor supply issues sending consumers online and to stores in droves,” said Steve Sadove, senior adviser for Mastercard and former chief executive officer and chairman of Saks Inc. “Consumers splurged throughout the season, with apparel and department stores experiencing strong growth as shoppers sought to put their best-dressed foot forward.”
Mastercard indicated that stores were up 8.1 percent, year-over-year, and that e-commerce rose 11 percent compared to 2020.
“Overall, the holiday season started earlier. There were less promotions and there were good sell-throughs,” said Dana Telsey, CEO and chief research officer of the Telsey Advisory Group. “The last week into Christmas and Super Saturday was more muted than usual. Yet everything we are seeing out there…says it will be a profitable fourth quarter with top line increases, too. Whether it was curbside pickups or buy online, pick up in store, everyone used new ways to make it work and they are here to stay.”
“Strong and steady,” is how one retail CEO, speaking anonymously, commented on the November-to-December period. “Online remained in high growth as store business returned. There was a broad group of category strengths, from leather goods to accessories, fragrances and jewelry. Dress-up in all categories came back strong.”
“Definitely November pulled volume out of December,” said another senior-level retail executive at a national chain. “People did shop earlier because there was so much noise in the news about shortages. Customers took it seriously. In the last 10 days of the season, Omicron took over the news cycle. It was a good season but not as good as it could have been due to the pandemic.”
“Super Saturday, like Black Friday, saw overall visits down for many retailers, yet the push to extend the season earlier looks to have benefited the wider sector,” Ethan Chernofsky, vice president of marketing for Placer.ai, which tracks traffic in stores, said in an email to WWD.
“While retail giants like Target and Walmart saw visits down on key shopping days, overall visits were in line if not above 2019 levels largely because of the capacity to effectively communicate with customers during this period and incentivize off-peak visits. And this is a major success because it enabled both visitors and retailers alike to gain more from a retail season that could have been upended by supply chain concerns, labor shortages, and rising COVID-19 cases.”
Chernofsky suggested that retailers drove more sales off of fewer visits.
Crowds at Target were smaller on peak days but for the 2021 holiday season overall, they at least matched 2019 levels.
Courtesy Photo
Craig Johnson, president of the Customer Growth Partners research and consulting firm, said he was “standing pat” with CGP’s upped forecast (primarily due to inflation) for U.S. holiday sales totaling $840 billion, representing a 10.2 percent gain over last year. His previous forecast was for a 6.7 percent increase to $813 billion.
Johnson cited “a sharp lull in business” in the beginning of December until Dec. 11, when things started to pick up. He said Dec. 22 to 24 saw “huge numbers,” ending the season on a high note.
He said one difference between CGP’s holiday estimate versus Mastercard’s is that CGP’s estimate extends to Dec. 26, while Mastercard’s goes through Dec. 24. Also, CGP’s holiday forecast spans all retail sales except autos, gasoline and restaurants; Mastercard said it excludes the automotive sector.
Meanwhile, the National Retail Federation sees holiday retail sales rising as much as 11.5 percent from last year to $859 billion. The latest figures from software giant Adobe indicate that In the week after Cyber Monday (Nov. 30 to Dec. 6), consumers spent $26.3 billion online, which is down 7.1 percent from last year when COVID-19 was even more disruptive to retail but up 40.1 percent from 2019. In the Dec. 7 to 13 period, $25.3 billion was spent online, which is down 2.4 percent year-over-year, but up 36.9 percent from 2019.
Sunday, the day after Christmas, saw plenty of gift card redemptions because people are worried about shutdowns, Johnson said. “Clearly, there was a COVID-19 factor,” he said.
While apparel was a strong holiday seller, “the real hero was tech — home tech devices like air fryers, massage guns, laptops, door ring systems and video games,” said Johnson. “The strongest part of apparel was performance wear,” from brands such as Lululemon, Under Armour and Athleta.
Johnson noted that for the Dec. 26 to 31 period, sometimes referred to as the “second season,” retailers bring out fresh merchandise at full price. Most retailers planned ahead, diversified their sourcing and had backup plans around supply chain delays.
Looking ahead, “If you just took the consumer fundamentals — the savings rate, personal income growth, employment numbers and household balance sheets — we think the holiday 2021 season augurs for a strong 2022. You do still have the uncertainty of the supply chain, which is on the road to being solved. By the second quarter, most of the kinks will have been worked out, but COVID-19 is the real wild card. Inflation cuts two ways. It nominally increases the sales comps, but reduces spending power,” said Johnson.
The Saks.com luxury e-commerce platform experienced “strong performance this holiday season, which as expected kicked off with customers shopping earlier, demonstrated by high demand throughout November and into early December,” a spokeswoman told WWD. “Top categories included outerwear, women’s shoes, handbags and beauty, especially within fragrance.”
The Saks Fifth Avenue stores “also continued to have strong performance through the holiday season, driven by men’s, fragrance, women’s shoes and jewelry. Top-performing locations included Boca Raton, Fla.; Atlanta; Beverly Hills, Calif.; New Orleans, and Philadelphia,” the spokeswoman said.
Neiman Marcus Group did not comment on its holiday business.
“I spent last week with three of my senior leaders and some people on my leasing team visiting 10 of our shopping centers. Traffic patterns were pretty consistent, particularly in the north. We are seeing traffic beating 2019 levels,” Stephen Yalof, CEO of Tanger Factory Outlet Centers Inc., said Friday. “People are shopping outdoors and we’ve got the value brands shoppers are looking for. I didn’t see a tremendous impact on supply chains at all. People anticipated shortages being a lot worse than they actually were. The big national brands were packed with inventory, and well staffed. I thought the surge of Omicron would have a big traffic hit this week. That’s not what we saw. Our parking lots were packed.” He also said retailers and brands were taking additional percentages off, but retailers generally held back on breaking price this year. Shoppers seemed to gravitate more to accessories, jewelry and cosmetics last week.
“I’m very optimistic about next year,” Yalof said. At the ICSC real estate conference in Las Vegas in December, “I was very, very surprised by how many retailers participated but even more so by the new stores they plan on in 2022 and 2023, particularly in our space. We are making a lot of deals with retailers. Those with a few stores now want more. American Eagle is starting to roll out its Offline athleisure brand. It’s starting to make its way into the outlets.”
Brooks Brothers posted strong sales early in the season because customers were spooked by supply chain issues, according to Ken Ohashi, CEO. “They were bombarded with a lot of noise about [potential shortages]. So we pulled a lot of business forward and will end the year strong.”
