Shoppers outside a Target store before Black Friday on November 26, 2024 in Clifton, New Jersey.
Victor J. Blue | Bloomberg | Getty Images
As the holiday season heats up, retailers have new opportunities to attract the pickiest shoppers and convince them to spend money on non-essential items like party wear, cosmetics or toys.
But the free-spending season didn’t boost sales for everyone.
Earnings reports from retailers over the past two weeks show a wide gulf between brands winning sales and those losing sales.
Target, Kohl’s and best buy Both companies reported disappointing third-quarter results as early holiday trading failed to do enough to boost their businesses. on the other hand, Walmart, dick’s sporting goods and Abercrombie & Fitch Sales have been strong in recent quarters.
The reports come after more than two years of inflation in the U.S., causing shoppers to become selective in their spending while balancing rising prices for groceries, housing, restaurant meals and more. Even as inflation has cooled, these patterns have persisted, forcing retailers to work harder to get customers to put their money where their mouth is.
Neil Saunders, managing director of GlobalData Retail, said discerning consumers have made the gap between successful and struggling retailers even more apparent heading into the holiday shopping season.
“People are still spending, but they may not have as much money to spend,” he said. “So instead of buying five things, they might buy three things. In this environment, it’s easy to say, ‘Well, where am I not going to buy anything? Who am I going to eliminate?’ They’re going to eliminate the stronger ones.” Weak retailers.
Set expectations
Holiday spending in November and December is expected to rise 2.5% to 3.5% over 2023, with a range of $979.5 billion to $989 billion, according to the National Retail Federation, a retail trade group. That’s smaller than the 3.9% increase in the 2022-2023 holiday season, when spending totaled $955.6 billion. The NRF’s data excludes car dealerships, gas stations and restaurants.
Yet retailers’ forecasts for the holiday season vary widely. dick and abercrombie both This week it raised its full-year forecast and said it expected a strong holiday shopping season.
“We’ve seen a strong early response to our holiday product line, and we’re ready and excited to enter our peak sales period this week,” Abercrombie Chief Operating Officer Scott Lipesky said on the company’s earnings call on Tuesday. excited.
Nordstrom and Walmart expressed a more cautious attitude.
On Nordstrom’s earnings call on Tuesday, Chief Executive Erik Nordstrom said the department store owner noticed a slowdown in shopping trends at the end of October and factored that into its forecasts. Despite beating Wall Street’s third-quarter sales forecasts, the company made a modest guidance change, raising the lower end of its sales forecast.
Walmart Chief Financial Officer John David Rainey told CNBC that the holidays are “off to a pretty good start,” but consumers are still spending cautiously and waiting for better prices.
However, the major retailer raised its sales forecast, with the results reflecting a promising change in trends. Walmart’s sales of general merchandise (items outside the grocery department or household staples aisles) increased annually for the second consecutive quarter. Previously, sales of daily necessities had declined for 11 consecutive quarters.
Rainey said the volatility likely reflects both the easing of inflationary pressures on households from lower food prices and the company’s ability to add more discretionary items to its site through third-party marketplaces, allowing it to sell more Non-essential items.
Target and Kohl’s both had pessimistic forecasts. Kohl’s department store warned its sales would fall more than expected and announced a chief executive change ahead of the crucial shopping season.
Target said it expects comparable sales to be roughly flat in the holiday quarter. The metric includes sales from Target’s website and stores open at least 13 months.
Despite the poor forecast, Target highlighted the ways it’s trying to capture shoppers’ attention and dollars. During a Nov. 20 earnings call, Chief Commercial Officer Rick Gomez said Target will sell more than 150 items inspired by the Universal Pictures film “Wicked,” including Clothing, food, beauty supplies and toys. It will also offer Taylor Swift fans exclusive vinyl records and books on Black Friday.
Target will also rely on a proven retail strategy to drive traffic: After cutting prices on 5,000 items earlier this year, the company will mark down an additional 2,000 items during the holiday season.
wants and needs
GlobalData’s Saunders said department stores such as Target, Kohl’s and Macy’s are having a tougher time this holiday season because they are selling more merchandise than they need.
This year, customers are “paying more attention to experience” and want to buy gifts with practical value.
“Things like silly little games and novelty socks and stuff like that — those are areas where people are really cutting back because they’re just pointless purchases that people don’t want to waste money on, even if it’s just for a gift,” he said. “They want the gift to be useful and relevant.”
Some companies may have purchased too much inventory ahead of the shopping season, or purchased the wrong mix of merchandise. For example, Sanders said that as he prepared for Black Friday at Kohl’s, he saw lots of clothing and small appliances like coffee makers and air fryers on display. If shoppers don’t come out in full force, these items may end up on clearance shelves.
“I just looked at it and thought, ‘Is this going to sell?'” he said. “Because store traffic hasn’t increased yet. So why would that change after Black Friday?”
Marshal Cohen, chief retail consultant at market research firm Circana, said the winning formula this holiday season will be value, not just lower prices but “great value” for new or high-quality items.
He added that retailers were ready to blame external factors for poor performance during the festive season.
“Every year, retailers always position themselves to give themselves good reasons why they can’t hit their targets,” Cohen said. “So when they talk about weather, dock strikes or supply chain issues, it’s more because they’re hedging against the future. There may be some challenges ahead.”
“I always say, ‘Okay, here comes the excuse this year. What will it be?'”
Revealed: Comcast is the parent company of CNBC and NBCUniversal. NBCUniversal distributes “Wicked.”
—CNBC’s Gabrielle Fonrouge contributed to this report.
About The Author
