As much as we may want to dissect how retailers did during the holiday season, the jury is still very much out.
First of all, despite all the media attention that Black Friday and Cyber Monday get, a few days of big sales do not a season make. And given the degree of discounting we have witnessed, sales increases and growth in gross margin dollars (which is ultimately what retailers use to pay their bills) may not be especially well correlated.
Second, we should not underestimate the criticality of the week after Christmas to any retailer’s holiday scorecard, particularly this year. The day after Christmas is typically one of the five busiest shopping days in any retailers’ calendar. And this entire week is when a substantial percentage of gift cards get redeemed and presents get returned or exchanged. It is also a time when retailers assess the sell through rates of holiday specific gift items and take aggressive markdown action on under-performers.
But we really need the entire month of January to get the complete picture, especially when we consider that revenues are one thing but profits are very much another. Not only will gift card redemptions and the cost of returns ripple more fully through retailers’ P&L’s across the next few weeks, but seasonal merchandise inventory misfires will need to be addressed aggressively to get ready for spring shipments to start hitting sales floors. Retailers’ ability to balance clearing out excess merchandise without taking a bath on markdowns is a huge determinant of performance.
Having spent more than 30 years working in retail, I learned long ago that apparent success in the weeks leading up to Christmas often did not result in strong quarterly performance once the dust had settled. The ultimate story of this holiday season is still far from written.
At a time when inflation is propping up sales figures, when many retailers are still sitting on a glut of inventory, and when consumer spending is beginning to decelerate, we should be careful we don’t experience premature celebration.
According to MasterCard
U.S. retail sales rose 7.6% between Nov. 1 and Dec. 24, which encompasses a majority of the holiday season, as steep discounts lured deal-hungry consumers, a Mastercard report showed on Monday. The increase is higher than the 7.1% growth Mastercard (MA.N) had forecast in September, when it anticipated consumers would pull purchases to October in the hunt for early deals.
However, this year’s holiday retail sales growth is less than the 8.5% increase last year as decades-high inflation, rising interest rates and the threat of a recession turned consumers cautious.
Retailers including Amazon.com Inc and Walmart Inc (WMT.N) in the United States offered large discounts during the holiday season to get rid of excess stock and bring back inventories to normal levels. That led to strong demand for everything from toys to electronics during the five-day-long period between Thanksgiving and Cyber Monday.
However, sales of electronics dropped 5.3% over the broader roughly two-month period, according to the Mastercard SpendingPulse report. But sales in the apparel and restaurants categories, rose 4.4% and 15.1%, respectively, helping boost the overall number. Online sales jumped 10.6% in the period, slightly less than the 11% increase last year, the Mastercard report said. Meanwhile, during the cyber week, total retail sales had jumped about 11%, a separate Mastercard SpendingPulse report in late November showed.
Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment. It excludes automotive sales. (Reuters)