Are department store shoppers getting a late start on Christmas or taking a pass?

Discussion
Photo: RetailWire
Nov 21, 2022

Described as a “nightmare before Christmas” by The Wall Street Journal, Macy’s and Kohl’s saw an unexpected sales slowdown in October and early November, leaving questions about whether holiday gifting is being delayed or cut back in a hyper-inflationary period.

“When we think about last year, the consumer was flushed with cash, and there was a pull forward of demand on well-documented inventory constraints,” said Jeff Gennette, Macy’s CEO, on a quarterly call last week. “This year, [the] consumer is hearing about a glut of inventory. They are under a tighter budget, feeling the impact of inflation on non-discretionary items and beginning to deplete their savings. With that in mind, we believe they are waiting until closer to holiday to make purchases.”

Macy’s sales picked up last week as cold weather spurred demand. Macy’s wide fourth-quarter guidance calls for sales to be flat to down 22 percent year over year.

The flat guidance assumes sales patterns revert back to 2019 patterns when holiday purchases were late. The bleaker side of the outlook assumes October and early November trends continue, “pressure on the consumer persists, and the promotional competitive landscape intensifies throughout the holiday and into January,” said Mr. Gennette.

Kohl’s likewise attributed recent sales weakness to a later holiday start. Management withdrew guidance due to the sales volatility and its CEO transition. Kohl’s chairman Peter Boneparth told analysts, “Visibility for the fourth quarter has been as difficult as any period I can remember.”

The cloudy holiday outlooks came a day after Target likewise blamed late holiday purchasing for softer sales. The retail industry is sitting on already elevated inventories, especially in categories such as apparel, as supply chain bottlenecks have eased. The late holiday purchasing may force stores to mark down earlier than planned.

Katrina O’Connell, Gap’s EVP and CFO, said last week, “We know we have to get out ahead of ensuring that we’re early enough, that we’re promoting at a time when she’s willing to buy, and we’re not waiting too late to clear the merchandise. And on the flip side, if they’re not going to shop until later, we don’t want to be too far out ahead of it.”

DISCUSSION QUESTIONS: How worrisome should the late holiday purchasing trend be for department stores? What advice would you have around markdown strategies, given the uncertain demand?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"There will be a lot of really deep price cuts in the next few weeks as retailers start to panic a bit about the holiday. Good news for consumers, bad news for margins."

Join the Discussion!

23 Comments on "Are department store shoppers getting a late start on Christmas or taking a pass?"


Sort by:   newest | oldest | most voted
Dave Bruno
BrainTrust

I’m not yet convinced that “late” is the operative adjective here. I fear “less” may in fact be what we see when all is said and done. With the cost of just the typical Thanksgiving meal up almost 23 percent this year, consumers simply don’t have the disposable income they had last year, when they were flush with stimulus cash and pent-up shopping impulses. We are up against unrealistic comps and so many headwinds, I suspect Wall Street is just waiting to pounce. Smart retailers will be aggressive with promotions to secure the biggest share possible of those reduced wallets.

David Naumann
BrainTrust

Good points Dave! It is a waiting game for retailers to see if shoppers’ spending is “late” or “less” or both. Those retailers sitting on excess inventory may be sweating and may need to start marking down aggressively sooner than they would like.

Neil Saunders
BrainTrust

This isn’t just about department stores, there was an across-the-board slowdown in discretionary categories in late October and early November. Target noted the same thing – although it and Walmart benefit from their grocery offering where spending is holding up relatively well. The big question is whether this is a pause for breath before consumers splash out for the holidays or whether this is the start of a more subdued period when consumer spending comes down to earth. As for department stores, putting their shop floors in order would be a good start. There is way, way too much mess and confusion at both Kohl’s and Macy’s and it impacts conversion.

Georganne Bender
BrainTrust

Mess and confusion is a good way to explain what’s happening on too many sales floors right now. How can you expect people to shop when the displays are unshoppable?

Michael La Kier
BrainTrust

A cloudy forecast has held back some shoppers and some retailers. Late holiday buying adds another cloud to what may be an approaching 2023 storm. Regardless, markdowns should always be done strategically, and retailers should not pull the trigger too early based on late buying to date. Slashing prices due to fear is a recipe for a Holiday and New Year hangover.

Lee Peterson
BrainTrust

I say taking a pass. It’s common knowledge that over 65 percent of shoppers online go to Amazon first, and since online shopping is now synonymous with early shopping, guess what? Besides, the department store model itself is broken: curated (by someone in NYC) labels that I can mostly get direct. It seems very 20th century to me. It’s going to be a slow, real estate-twisted demise for department stores and each holiday season only accentuates that fact above the roaring PR produced by the vertical. But as someone once said in the ’90s, don’t believe the hype.

Carol Spieckerman
BrainTrust

I have a hard time believing that the “average consumer” is thinking about inventory gluts. With Target and Walmart reporting softness in softlines for two straight quarters, expecting Kohl’s and Macy’s to magically buck the trend is unrealistic. Despite dabbling in attempts to expand into new categories and lean into brand partnerships, Kohl’s, Macy’s, and JC Penney just aren’t as diversified (including solutions and services) and are inherently too reliant on the very categories that are slowing down across the board. Macy’s backward slide into the meh middle of retail and inconsistent in-store merchandising has further cut into its potential differentiation. It’s a tough spot to be in made even tougher as cheaper, faster fashion disruptors like Shein lower the bar.

Jeff Sward
BrainTrust

This season is going to be a nail biter, for sales and margins and end-of-season inventory levels. All three are at risk to disappoint. I suspect there won’t be many retailers who hit plan on all three metrics. A review of selling floors at the end of January is going to provide some very interesting scenarios. Especially since retailers will be in the middle of planning and buying for Fall 2023. How will that demand planning and supply chain conversation unfold?

Gary Sankary
BrainTrust

I believe many retailers should be very worried about Holiday 2022. Trends and traffic patterns have indicated that this is going to be a challenging year for the industry as consumers are struggling with expenses and, I believe, after seeing lots of improvement in their house debt during the pandemic, aren’t as willing to go back to the way things were, carrying high personal debt loads.

It also feels like there aren’t the “killer must-have” items that have driven the frenzied buying we’ve seen in past years. This season feels a bit lackluster. I believe all these things contribute to a lack of enthusiasm.

Retailers need to consider what strategies they can implement now to differentiate themselves in the market and drive traffic. I suspect there will be a lot of really deep price cuts in the next few weeks as retailers start to panic a bit about the holiday. Good news for consumers, bad news for margins.

Brian Delp
BrainTrust
18 days 12 hours ago

This is likely a partial reaction to significant changes in how retailers are marketing and promoting. During the pandemic, and especially last year, Black Friday sales became month long events. Consumers are confused as to when the best deals will be, and at a time when the dollar doesn’t stretch as far they’re likely playing the waiting game. Who wants to play a game of retail chicken?

Gene Detroyer
BrainTrust

Does Mr. Gennette really think the average consumer knows about an inventory glut at their favorite retailers? Does he genuinely believe that the customers are so sophisticated that the retailers will be forced to execute massive price cuts?

For retailers, this is going to be a difficult season. The trend is now in place; if they want it to turn around, the retailer’s actions will destroy profit margins.

Gary Sankary
BrainTrust

My only counter is stale inventory stays stale. They have to move through it to make room for spring. There’s more traffic now — this is their best chance.

Gene Detroyer
BrainTrust

Of course. You are very correct. The result will be a massive margin hit. Even if they uptick in sales, the bottom line will be ugly.

Christine Russo
BrainTrust

It should be very worrisome. The customer is waiting for markdowns. This is a good case for using loyalty programs to drive sales in October and November — customers feel special and rewarded for their loyalty. I guess that didn’t really happen (enough) and so now it’s a fight to the finish. All being equal, it will be price-drops and a race to the bottom.

Cathy Hotka
BrainTrust

Unfortunately for department stores, customers have a panoply of formats from which to choose. Some introspection might be in order.

Dick Seesel
BrainTrust

While the NRF is touting a “revenge shopping” holiday season in its usual blue-sky way (forecasting 6 percent or better sales gains), a lot of realism is in order. I don’t think apparel sales are doomed based on a slow start, but they will kick in late — and at deep discounts. News reports of ample inventory levels are encouraging savvy shoppers to wait, and piles of unsold 2021 merchandise are adding to the margin pressure.

Harley Feldman
BrainTrust

Retailers should be worried about the late purchasing trend. Shoppers are stressed over inflation eating into their savings, prices on things they might buy going up, and the increased cost of a Thanksgiving meal. I noticed that secondhand stores seem to be busier than last year, a sign that shoppers are buying down. Advice on a markdown strategy: stay close to sales trends and start marking down early to avoid having high inventories after Christmas. If the retailer has an online presence, promotions to encourage sales can be pushed more quickly if sales do not materialize as expected.

Peter Charness
BrainTrust

I think the in-store shopper is not only going to be late, but they are also going to be missing entirely this year. Black Friday started early and often this year and it’s anything but in-store. I am betting Walmart, Best Buy and others who are aggressively promoting online will see comp increases. If a retailer is waiting by the front door for the crowd to come by — it’s going to be a cold, lonely winter.

Bob Phibbs
BrainTrust

Every year the same story. Most every pundit: coal for Christmas. I’m tired of it. Expect Black Friday news: traffic down!, expect Monday – sales missed forecasts, and a slew of the same messaging over and over how malls are dying, no one has money, etc. And in January, buried will be the facts — as always — retail sales were up. Handwringing at any time is not helpful, but why the perpetual paint-the-lily story?

Ananda Chakravarty
BrainTrust

So right you are Bob … too much negative almost makes it a self-fulfilling prophecy, but under the covers the ship rights itself.

Ananda Chakravarty
BrainTrust

Forecasting models have been challenging given the pandemic and the lack of clarity in returning to a pre-pandemic year. With folks like Bezos telling folks to prepare for risk, the situation seems bleak. However, the real data shows higher traffic in stores, more interest in purchasing, and the shopping vs shipping experience becoming more attractive. Brick and mortar stores will be in for a surprise if they believe demand just vanished on account of current market pressures. We have super low unemployment right now, and even if people buy less (which for companies like Target and Walmart they are not), there are more people who will be buying. For retailers, I wouldn’t be too hasty to execute markdowns. Instead use real-time pricing data to help map out a course for the season. Last I looked, the mall parking lots near me were packed on weekends.

Craig Sundstrom
Guest

Like a lot of people here, I’m curious/confused why department stores are being singled out. For many years there was some logic in the idea, as it was a declining sector — i.e. department stores were performing differently (worse) than other retailers. But there’s nothing presented here to show that’s the case now. And if the premise is that inflation has shifted spending into a few essential categories — food and fuel — I would expect it wouldn’t be the case.

Anil Patel
BrainTrust

Whether or not to implement markdowns is no longer a question. Given the current situation, it has become obvious that customers are looking for securing the best deals and discounts. Additionally, we should expect a head-start on holiday shopping by the coming Friday. I believe only then we will be able to exactly derive the customers’ buying curve.

wpDiscuz
Braintrust
"There will be a lot of really deep price cuts in the next few weeks as retailers start to panic a bit about the holiday. Good news for consumers, bad news for margins."

Take Our Instant Poll

How confident are you that the sales weakness seen in October and early November is more indicative of late holiday buying than a broader spending slowdown?

View Results

Loading ... Loading ...