Are disappointing holiday sales numbers a harbinger of things to come?

Photo: RetailWire
Feb 19, 2019

Until last week, everyone believed that strong retailers (Amazon, Target, Walmart, et al) did quite well during the holidays while weaker ones (J.C. Penney, Sears, et al) did not. Overall, however, expectations for the industry numbers were high with various organizations including Mastercard, the National Retail Federation and others forecasting and/or reporting sales gains in a range between 4.3 percent and 5.1 percent for the last two months of 2018. So, last week’s Census Bureau report that U.S. retail sales fell 1.2 percent in December, the largest monthly drop in nine years, has many scratching their heads.

NRF reported that, with the numbers for December in, total holiday sales increased only 2.9 percent overall, well below the association’s forecast of a sales gain between 4.3 percent and 4.8 percent. Mastercard reported sales increasing 5.1 percent between Nov. 1 and Dec. 24.

“All signs during the holidays seemed to show that consumers remained confident about the economy,” said Matthew Shay, president and CEO of NRF, in a statement. “However, it appears that worries over the trade war and turmoil in the stock markets impacted consumer behavior more than we expected. There’s also a question of whether the government shutdown and resulting delay in collecting data might have made the results less reliable. It’s very disappointing that clearly avoidable actions by the government influenced consumer confidence and unnecessarily depressed December retail sales.”

The Census Bureau’s data shows many retail sectors posting sales gains in November and December, with online growing the fastest at 11.5 percent and sporting goods experiencing the biggest decline at -13.5 percent.

A Wall Street Journal article reports that conflicting data makes it difficult to read the economic tea leaves. The Federal Reserve reported that industrial production was down in January, even though consumers were more optimistic in February, according to a University of Michigan poll. The New York Federal Reserve recently reported that total household debt in the U.S. rose 0.2 percent in the fourth quarter, surpassing the previous highest level in the third quarter of 2008.

DISCUSSION QUESTIONS: What do you make of the revised sales numbers for the 2018 holiday season? Does the U.S. Census Bureau report along with other economic data have you feeling more positive or negative for the retail industry’s prospects in the year ahead?

Please practice The RetailWire Golden Rule when submitting your comments.
"One inning doesn’t make a ballgame. If there ever was a blip, this is it. "
"These are only disappointing because of raised expectations. In fact, they’re just fine sales and speak more to “projections” and Mastercard-style tracking than anything."
"Those retailers who have invested in both the organizational and technological changes necessary to compete are prepared for the challenges of 2019."

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21 Comments on "Are disappointing holiday sales numbers a harbinger of things to come?"

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Mark Ryski

The revised numbers do suggest more headwinds than the initial, much rosier projections for the holiday season. But while the economic data is mixed, overall I remain cautiously optimistic. Walmart is an important bellwether and today they announced Q4 comp sales of +4.3 percent (The Street was expecting +3.2 percent), and their online business grew +43 percent. On their earnings call they suggested that the tariffs haven’t yet had a significant impact and they reiterated positive fiscal 2020 guidance. I think this is a good sign for 2019.

Ben Ball

What holiday season are you measuring? My spouse finished our “Christmas shopping” in September.

On another note, if you were making critical decisions for your business based on these data points (and many of us are), would you pick the U.S. Census Bureau as your guiding light?

Ryan Mathews

Since nobody seems to like Ben’s point, let me play contrarian and say that I think he has something here.

While it is only anecdotal evidence, it seems to me that more and more people are finishing up their holiday shopping ahead of the holidays. Can we quantify how large that number is and how deeply it impacts holidays sales? Probably not, but it’s becoming at least a micro-trend. Let’s face it, it’s a pretty good way to save yourself the pain of holiday mall crowds, faux-deals, etc., etc.

Now as to the reliability of U.S. Census Bureau data … if we start throwing that out, there goes a ton of longitudinal marketing studies. Whether you think that would actually constitute a loss or not depends on you.

Charles Dimov

Of course, retail’s figures are symptomatic of economy as a whole. The U.S. government shutdown clearly had a serious negative impact on retail. We can only hope that the effects will clear, and that this was a temporary pullback. What is scary is that these types of shocks could trigger deeper pullbacks. However, at the moment, it does feel like business as usual, and that the pullback was short lived (fingers crossed).

Brandon Rael

Under normal conditions, a strong 4th quarter and holiday season is a harbinger of things to come in the new year. However with continued geopolitical and global economic concerns, retailers have taken a cautious stance in 2019.

Those retailers who have invested in both the organizational and technological changes necessary to compete are prepared for the challenges of 2019. Retailers who also have been responsive to the customers’ needs and shopping preferences across all channels have a chance to build momentum in 2019. This year is all about providing outstanding customer experiences and pivoting your organization to exceed all expectations.

With all of that said, there are plenty of uncertainties that may arise this year. However the key is to be prepared.

Sterling Hawkins

Brandon is right here; the focus should be on being a prepared organization regardless of outside circumstances (competition, politics, market, etc.) Developing an ever-ready culture that’s engaged and willing to do what has to be done to deliver an outstanding customer experience is indefinitely key to success.

Jeff Sward

The rosy articles published pre- and post-Christmas were always at odds with my very unofficial headcounts at the malls I was visiting. But even given what I thought was light traffic, I took heart in the fact that I saw what I viewed to be good sell-throughs at most mall retailers. And there was always reason to be cautious about 2019. Way too much political and economic turmoil to be overly optimistic. The opportunity for a new hand grenade being tossed on any given day was always high and remains high. The assignment remains the same — head down, plan conservatively and try to do it a little smarter every day. What are you doing the same, and why? What are you doing differently, and why?

Mark Heckman

December was a very shaky month on the financial markets. The Fed was raising interest rates, (again), and consumers were watching their 401ks lose 10 to 15 percent of their value. Couple that with hearing a constant barrage of pundits talking about the economy slowing down or devolving into recession and the negative impact of tariffs — it is logical that these factors had an effect on holiday retail sales. Since then, retail has posted mixed but mostly positive results and equities have recovered much of their lost value. Not coincidentally, Walmart just posted great numbers for Q4, beating both revenue and profit expectations. I see the coming year as a continuation of mixed retail results. Weakened bricks retailers will close more stores, but with consumer confidence remaining high, unemployment numbers low, and the Fed taking a more cautious approach to raising interest rates, the overall retail picture for the coming year remains very strong.

Bob Amster

I have it on pretty good authority that the sampling by the Census Bureau was not representative, and the numbers are, in fact, better than what has been published. Take it all with a grain of salt this time.

Ralph Jacobson

One inning doesn’t make a ballgame. If there ever was a blip, this is it. The trajectory of the economy shows steady consumer confidence and the market is as strong as ever. 2019 will prove to be a robust year for consumer spending, and although areas of the country may see flattening due to a number of reasons (including state and local tax exodus), the overall performance will show growth.

Harley Feldman

The momentum of the economy and consumer sentiment was encouraging going into the holiday season. Then the rapidly falling stock market and the government shutdown happened deflating consumer sentiment. Because of that change, consumers likely spent less than expected due to concerns about their immediate future. I believe this was a short term phenomenon as the stock market is recovering rapidly and the government shutdown is over. The Consumer Sentiment Index went up from 91.2 in January 2019 to 95.5 in February. That signals consumers have more confidence in the economy now. Therefore a return to a growing economy and higher retail sales is highly likely.

gordon arnold
The equations used to measure the strength of any retail platform are limited in scope and improperly filtered to the extent that market predictability and/or health reports can be largely misleading. The pressure to post growth surpasses everything including store development. Most experts see the growth of e-commerce as the demise of brick-and-mortar retail. E-commerce is nothing more than a continuance and modernization of the catalog business largely through the development of e-mail and electronic transaction processing. A fair and balanced look at retail will see how inventory issues like out-of-stocks and very slow-turn items can and do erode profits at lightning speed. In addition to the loss of sales, inventory management problems will do more to reduce store traffic than most retailers care to admit. Today e-commerce owes its growth largely to free shipping and availability. Little is done to introduce new product or in finding new and innovative ways to create and grow impulse sales. As an industry retail is not doing much to asses the needs and implement short and long term… Read more »
Doug Garnett

These are only disappointing because of raised expectations. In fact, they’re just fine sales and speak more to “projections” and Mastercard-style tracking than anything.

Let’s get some perspective: 10 years ago if someone said that in 2018 holiday sales among retailers would increase by 2.9 percent they would have been pilloried for not embracing the “retail apocalypse” storyline. They would have never been hired again as a consultant.

But come 2018, we continue to see solid year over year increases (yes, 3 percent across the biz is solid).

So… No. This isn’t a harbinger of things to come. It’s a censure of organizations who too easily believe they can predict a season’s spending. Accurate prediction of sales is an incredibly iffy proposition.

Michael La Kier

The amount of uncertainty and strife in our government on a daily basis (regardless of your political beliefs or standing) is high. In times like these there is an understandable level of consumer uncertainty which typically leads to more measured consumer spending. So reports of a consumer spending renaissance are likely to be exaggerated and over-reported.

Andrew Blatherwick
It is hardly surprising that consumer confidence is low. The threat of trade wars, government shut down and an impasse in the two sides of government hardly signal a time to go out and spend as if everything is rosy. It is no better in Europe with Brexit, Italy almost bankrupt, France with riots on the streets and the rest of Europe trading very badly the outlook is not great, in fact if it were not for Brexit the focus on the European economy would be more critical and we would be hearing horror stories from most countries. Then we move to China where it is believed that a slowdown is well under way, trade wars with America just making the whole thing worse. So what good news is there around the globe to drive consumers to think positively? Not very much. Retail will always be at the mercy of human sentiment and when there is little good news consumers cut down on spending go into survival mode. You would think that politicians and governments… Read more »
Bob Phibbs

Can we please stop looking for the dark lining when it comes to retail ? The more important figure was that despite the month-to-month tumble, sales were actually UP 2.3 percent compared to December 2017. Total sales for the whole 2018 holiday shopping season (October through December) increased 3.7 percent year over year.

Lee Kent

Hear! Hear!

3 years 5 months ago

It will take some time to validate the soundness of the revised sales numbers for the 2018 holiday season. Meanwhile, it should come as no surprise for veterans of the compressed, last two weeks before Christmas, “make it or break it” retail season. If you will recall it was precisely then that the stock market turned on a dime (why exactly?) and plunged 11+% in this crucial time period. Nothing like watching your 401K tank to put your credit card away in a hurry.

Now, with the post holiday rebound, many financial advisors are saying “we’re in the seventh inning” and expansion should go on for a while. Unfortunately, the dizzying number of economic variables is growing and make the future even more foggy. If it is the seventh inning, the starter may be tiring and you better have some plans for relief pitching ready to go.

Steve Dennis

There are a few things going on here. First, we should all know by now that any attempts to extrapolate the holiday season from a good Black Friday or Cyber Monday are inherently flawed, as I’ve written about for many years. Second, while the overall sales numbers are interesting, we still don’t know much about profits. Third, as has been the case for some time now, averages don’t matter much as performance continues to bifurcate.

Those unremarkable retailers that continue to swim in a sea of sameness continue to post poor results. Retailers that are executing on a well harmonized strategy offering memorable products and experiences are gaining share. The one big thing to watch is the hit on margins from what I call the “omnichannel migration dilemma” as companies seize the e-commerce opportunity and embrace the blur they are investing a lot of capital and often experience lower margins despite the sales growth. See Walmart’s earnings announcement as yet another data point here.

Craig Sundstrom

To be honest, I never thought the economy was that great anyway — or, more precisely, I saw little difference between the +2-4% GDP/5% unemployment economy that “hasn’t recovered yet” and the +2-4% GDP/4% unemployment economy that’s “booming.” Still, disparities between expectation and announcement of this magnitude are, if maybe not unprecedented, quite unusual, so it will be interesting to see the final number… and January, as well.

Ananda Chakravarty

The retail sector is continuing to grow. There were some breaks in the path — crash of the stock market, wary spending, and pre-buying in November instead of December, and a government shutdown. Not sure who identified this already, but +2.1% from last year and -1.3% from November. November had only a small gain from Oct 2018 numbers as well. This was just a small blip in the economy from several factors and doesn’t contradict the success of the overall season. I would be surprised if it didn’t happen after a shutdown and market drop. Check the $505.8B details here.

"One inning doesn’t make a ballgame. If there ever was a blip, this is it. "
"These are only disappointing because of raised expectations. In fact, they’re just fine sales and speak more to “projections” and Mastercard-style tracking than anything."
"Those retailers who have invested in both the organizational and technological changes necessary to compete are prepared for the challenges of 2019."

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