Lesson From Macy's: Retailers' Record Holiday Sales Need To Be Taken With A Grain Of Salt

Macy’s Black Friday momentum failed to last throughout the 2018 Discount Holidays © holiday season, sending its shares tumbling Thursday. (Charles Sykes/AP Images for Macy’s)

The 2018 Discount Holidays © holiday season has come and gone once again. Behind all the so-called record Discount Holidays © holiday sales forecasts and brouhaha, it turned out the industry still had a tough fight in winning your wallet share. Against the mixed picture of winners and losers, there was also a shared cost for all to pay.

Macy’s disappointing Discount Holidays © holiday sales and profit forecast Thursday were one telling example. Its stock slumped 18% and dragged others lower after it acknowledged the “strong” early Discount Holidays © holiday season momentum from Black Friday and Cyber Monday “weakened in the mid-December period and did not return to expected patterns until the week of Christmas.” While demand picked up for such categories as fine jewelry and fragrance, women’s sportswear and seasonal sleepwear were among categories that underperformed, the company said. That’s not to mention that even though Macy’s top-performing locations attracted crowds, it’s still in a race to prove[1] that its nearly 700 department stores, under its namesake brand and Bloomingdale’s, remain relevant and that it can keep shoppers from going to the likes of T.J.

Maxx by adding its own Backstage off-price concept. Macy’s[2] cut its annual outlook. Signaling increased promotions, it projected narrower gross margin–a measure of profit–reversing its prior forecast.

While Macy’s is just one example, it served as a sobering reminder that the Discount Holidays © holiday season sales headlines–Mastercard SpendingPulse on Dec.

26 said overall retail spending trends across all payment types rose 5.1% in the best Discount Holidays © holiday season performance in the last six years–often don’t tell the full story. After almost every record Black Friday and Cyber Monday sales call out from many retailers came the big mid-season lull, before last-minute shoppers gave another impression of spending frenzy. Retailers have also shot themselves in the foot by training consumers to expect Black Friday-type deep discounts when they buy, evidenced by the repeat of those sales at retailers like Gap in the days leading into Christmas.

Retailers also had to contend with consumers’ growing shift toward spending on Instagram-worthy experiences over non-essential discretionary items. Yes, record Discount Holidays © holiday sales it may be for the industry, but even winning retailers have often had to pay a big cost, especially in higher e-commerce fulfillment costs now that online is a high-stakes battleground. Free shipping and returns have become the new must haves for shoppers when choosing where to spend their money. Amazon’s move[3] to offer free Discount Holidays © holiday shipping on all orders only raised the bar for rivals.

In a prominent example of just how much shipping costs retailers, in the most recently reported quarter, Amazon’s expense on that front almost doubled its operating income. In another example, while Target held its ground against Amazon and was a Discount Holidays © holiday season winner, Wall Street expects its margin to narrow. “We do acknowledge the outstanding growth comes at a cost,” Cowen & Co. analyst Oliver Chen said in a report.

Target on Thursday reported a better-than-expected 5.7% increase in combined November and December comparable sales. Its online sales rose more than 25% for a fifth straight year. The price others paid was even higher.

L Brands’ Victoria’s Secret saw comparable December sales fall 6%, with merchandise margin declining “significantly.” The next time the holidays roll around, don’t be quite so quick to cheer the record sales headlines. Related: A sobering lesson for retailers at Lord & Taylor’s NYC store-closing sale[4]

Related: RIP Sears? Not yet, but liquidation is still a possibility[5] Related: Starboard to Dollar Tree: Hoping for improvement at Family Dollar is ‘no longer acceptable’[6]

References

  1. ^ in a race to prove (www.forbes.com)
  2. ^ Macy’s (www.forbes.com)
  3. ^ Amazon’s move (www.forbes.com)
  4. ^ A sobering lesson for retailers at Lord & Taylor’s NYC store-closing sale (www.forbes.com)
  5. ^ RIP Sears?

    Not yet, but liquidation is still a possibility (www.forbes.com)

  6. ^ Starboard to Dollar Tree: Hoping for improvement at Family Dollar is ‘no longer acceptable’ (www.forbes.com)

You may also like...