If Holiday Sales Were Strong, Why Are So Many Retailers Reporting Sluggish Revenues?

It’s a tale of two conflicting outcomes: Some of the country’s major retail chains have posted disappointing revenue declines for the holiday season, yet an overarching report by the National Retail Federation this week suggested retail sales for the period showed solid gains.

According to the NRF, which cited U.S. Census Bureau data, retail sales during the 2019 holiday shopping period (excluding automobile dealers, gasoline stations and restaurants) rose 4.1% to $730.2 billion. This is on the higher end of its forecast in October of a 3.8% to 4.2% increase. Last week, however, department stores Macy’s, Kohl’s and JCPenney — including Target just yesterday — reported sluggish results during the season, which includes three of the biggest shopping days of the year: Black Friday, Cyber Monday and Super Saturday (the last Saturday before Christmas).

Beyond uncertainty around issues such as trade and interest rates, one of the factors that impacted this year’s retail performance was the shorter-than-usual holiday shopping season. With a late start to Thanksgiving, there were six fewer calendar days during the period compared with 2018 — putting pressure on retailers, who would have had to sell more in volume per day to account for those days. As a result, many retailers had begun rolling out their promotions even before the season began or upped the competition with same-day or next-day delivery.

That strain was felt even more by department stores, which weighed down the retail sector as sales in the category slipped 0.8% from November and declined 5.5% from the previous year, the Census Bureau reported. Further, many consumers continue to opt for online and mobile shopping over traditional brick-and-mortar. “Generationally, it’s probably more prominent now than ever,” said Naveen Jaggi, president of retail advisory services at JLL. “Millennials clearly don’t look at department stores the same way that baby boomers do.”

What’s more, a number of traditional brick-and-mortar chains are still struggling to define what omnichannel retail means and looks like for their brand. Nikki Baird, VP of retail innovation at Aptos, stressed the importance of omnichannel offerings amid an increasingly experiential environment. (Aptos works with more than 1,000 apparel, footwear and other merchandise retailers, such as Adidas, Cole Haan, Famous Footwear, JCPenney and Tod’s.)

Baird cited her own conversations with retailers that use services including “buy online, pick-up in store” and shoppable mobile apps, indicating that the majority of omnichannel-heavy retailers were “very happy” with their holiday sales results, while those with two omnichannel offerings or less “were not feeling so good” about their performance during the season.

“That split had nothing to do with the category of goods,” she explained. “If you couldn’t capture the sale when you had the chance, then consumers took their business elsewhere. This really might be the first holiday season where the results depended more on how you could sell, rather than the products themselves.”

According to the Census Bureau, overall December sales, including auto dealers, gas stations and restaurants, were up a seasonally adjusted 0.3% from November and up 5.8% unadjusted year-over-year. In its report, which is based on census data, the NRF noted that the growth rate in 2019 is nearly double the weak 2.1% seen during the 2018 holiday season when, there was a lengthy government shutdown, stock market volatility and interest rate hikes.

The retail trade association added that the modest gains in November (a 1.3% gain from the previous year) and the surge in December (up 6.7% year-over-year) were partly because two key days of the Thanksgiving shopping weekend — the Sunday after Black Friday as well as Cyber Monday — fell in December and not November as they did in 2018.

As such, Jaggi said he’s still positive on retail. “My belief is that smart retailers understand that the clicks-and-bricks business and the brick-and-mortar business are not mutually exclusive; they’re mutually complementary,” he said. “The ones who embrace all of those formats will ultimately succeed.”

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