The post-Thanksgiving days have been terrible for most retailers. Sales have slowed to a crawl. It is still much too warm and millennial customers are frugal, apathetic, and unwilling to spend money. Retailers resort to the only thing they know when sales are slow: announce another sale. What a terrific idea – if only it would work.
Here are some facts:
- Most retailers such as Macy’s, J.C.Penney, Kohl’s, Target, Walmart and Amazon, among others, extended the Cyber Monday to a full week. That added some momentum to Internet sales.
- Macy’s ran a Friends and Family event that extended over a week. It suggests that their effort to move merchandise needed the help of family and friends.
- Not to be outdone, Lord & Taylor commenced their Friends and Family event on Wednesday, December 9.
- J.C.Penney ran a one-day event on Wednesday, December 9, highlighting fleece for kids and sweaters for women and men at prices below Black Friday. This suggests that sweaters better sell soon.
- J.C.Penney ran an ad for a Super Saturday sale starting on Thursday, December 10, with extended hours on Thursday, Friday and Saturday suggesting that this “one-day” sale is really three days long.
- Bloomingdale’s ran a 30% - 40% off boots sale on December 10 that runs through December 24. One wonders if that will clear the shelves or if even more markdown incentives will be needed.
- Saks Fifth Avenue ran a 50% off Russian sable coat and jacket sale plus a gift card worth up to $ 2000 starting December 10. This promotion runs through Sunday, December 13.
These are all indications that business is weak. Not many retailers reported November sales, but some who did were terrible. For example, Banana Republic reported a drop of 19% in comparable store sales. Old Navy reported -9%, Buckle -7.9% and the Gap -4% comp sales. As a counter point, there were a few bright spots. Both of L Brands two big businesses were up with Bath & Body Works reporting a comp sale increase of 7% and Victoria Secret rising 6%. I believe that coming out of November most retailers were hurting and sales were disappointing. I conclude that in November retail sales for most companies were flat to down 2%. Economists are predicting + 0.3% for November compared to + 0.1% in October.
The lack of momentum exiting November will make December even more promotional than planned. I expect that on December 17, one week before Christmas, all retailers will hit the panic button and take heavy markdowns. This will give consumers an incentive to buy for the whole family. American consumers are sentimental. They want to give a Christmas present to everyone they love (including the dog). I expect that sales for the holiday selling period will increase by 3%. Please note that this includes an extra selling day between Thanksgiving and Christmas, which should produce a 1½% increase in sales. As a result I am suggesting that excluding this extra day, retail sales for the holiday selling period will increase a meager 1½%. One can surmise that profits will suffer as retailers mark down everything in order to make room for the next selling season.
Despite the shortfall of sales, time doesn’t stop and retailers have already purchased merchandise for 2016. Receipts of new fashion goods might be held until the next fiscal year begins in February. Given the inventory pileup that is currently under way, I expect that in January and February most retailers will be focused on pushing clearance merchandise at very steep discounts.
Yes, Virginia, there really is a warming trend and it is keeping Santa away this year. Just ask any retailer. Or better yet, read the signs. The sale signs that is.
