With Thanksgiving and Black Friday marking the official start of the all-important holiday season ahead, retailers are hoping for a lot of green in their Christmas stockings so they don’t have to worry about turning blue from a frosty holiday selling period and seeing red in their year-end balance sheet.
So far, the big retail winners are Walmart, Target and the off price retailers, all of which posted solid third-quarter results. Their strong performance is expected to continue through the holidays.
Macy’s remains upbeat on holiday sales, but lowered its guidance for fiscal 2019 following a disappointing third quarter. Ditto for Kohl’s regarding its lowered forecasts and not-so-great third quarter performance. Smaller retailers also have their corresponding share of worries.
The problem is that this holiday season will be highly promotional, maybe even more so than in 2018. According to Cowen & Co.’s Oliver Chen, retailers have elevated inventories, women’s apparel items are receiving negative customer responses, merchants are marking down product, thanks to the warmer temperatures.
All of that doesn’t bode too well for apparel sales. Chen said specialty and apparel-related inventory levels appear outsized compared with some of their competitors. Re-commerce and subscription options, as well as the spending shift to experiential, “could weigh on holiday spending on apparel this season,” he said.
And the quality of sales, due to the promotional environment, will end up hurting retail margins. Chen noted that a number of retailers in his coverage universe “have already cut guidance at least once, and will need to report strong comps to avoid missing lowered expectations.”
“We view the assortments at Tiffany, Tapestry (at Kate Spade) and Nordstrom as the most gift-able this season, while the convenience and omnichannel flexibility excellence at Target, Walmart and Nordstrom will be a positive competitive advantage to maximize conversion within a tight shopping calendar,” Chen said.
And while the expectation is that online shopping will continue to grow, the experience might not be so rosy on that front. According to an online study from Pitney Bowes, consumer dissatisfaction with their holiday shopping experience has doubled to 60 percent in four years. The top three complaints: delayed shipments, shipping costs and inaccurate tracking—areas retailers might want to focus on to keep their customers happy.
Lila Snyder, an executive vice president at Pitney Bowes and president at its commercial services division, said, “Despite the significant investments retailers and marketplaces are making in the online shopping experience, consumers continue to be disappointed, especially around the holidays.”
As more spending is shifting online, retailers need to “shift resources and investments to areas like fast and free shipping, accurate tracking and free and easy returns to keep up with consumer expectation,” Snyder added.