Retailers Are Banking On Post-Christmas Deals to Lift Sales — and Clear Through Inventory

Christmas 2022 might be a thing of the past, but retailers are still looking to win over deal-hungry shoppers — and clear through their inventory excesses — with a slew of post-Christmas sales through January.

November and December are typically the crucial shopping months of the holiday season, but this year, late December and January are shaping up to be important as well, as retailers look to shed excess inventory before the next quarter. Walmart, Nike, Target, Lululemon and other major retailers entered the holiday season this year with higher-than-usual inventories, due to rapidly shifting trends and inflation-stricken consumers. Throughout Q3 and Q4, these retailers have been intentional about running promotions and markdowns to help them clear through inventory, a tactic that will likely persist through the end of Q4.

“Retailers could be forced to offer deeper discounts post-Christmas to clear through excess inventories, meaning higher-than-forecast 4Q merchandise margin pressure is still a possible outcome,” wrote Morgan Stanley analysts led by Alex Straton in a Dec. 23 note.

Shoppers will likely use these persisting deals and promotions to their advantage. 70% already said they plan to keep shopping after Dec. 25, according to a survey from the National Retail Federation. And many will likely use store credit or extra cash via returns to fund new purchases this week.

When it comes to deals, shoppers have a lot to choose from. Target on Monday rolled out its “Clearance Run” sale, which includes discounts of up to 50% off categories such as clothing, shoes, toys and beauty online and in stores nationwide. Target in November reported a sales and profit dip in the last weeks of Q3, as shoppers pulled back on spending due to inflation, CEO Brian Cornell said. Profit fell by almost 50% in Q3, reflecting efforts to clear through excess inventory ahead of the holiday season — an effort that appears to have continued through Q4.

Lululemon, which downgraded its holiday season outlook earlier this month, is also carrying out an end-of-year sale, looking to pick up some sales wins in the week after Christmas. Walmart and Nike have rolled out similar end-of-year sales campaigns.

According to early figures from Mastercard, U.S. retail sales between Nov. 1 through Dec. 24 increased 7.6% year-over-year. Black Friday was the top spending day of the holiday season this year, up 12% year-over-year. While these numbers are not adjusted for inflation, they represent a cost-conscious consumer that took advantage of markdowns and a heavily promotional environment this holiday season.

The National Retail Federation predicted that total sales between Nov. 1 and Dec. 31 would grow between 6% and 8% compared to 2021, representing a total of between $942.6 billion and $960.4 billion in sales, on top of last year’s record-breaking 13.5% growth to $889.3 billion.

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