The Thanksgiving weekend brought record sales for retailers who went on to post better-than-expected November comparable-store sales and are now padding up for the holiday season. Does this indicate that the retail party has just begun?
Early hours store openings, huge discounts, promotional activities and free shipping on online purchases were enough to lure customers on Black Friday that turned out to be a bonanza for both brick-and-mortar as well as e-commerce retailers.
The data released by Swampscott, Massachusetts-based Retail Metrics, reveals that comparable-store sales of over 20 companies rose 3.2% beating the expectation of 3.1%. The data provider further added that 57% of retailers outpaced while 33% missed their expectations. Yes, there were retailers that stuck to old traditions and were not bold to think out of the box. These missed the boat and failed to seize the opportunity of pent-up demand.
Season’s Blast Breaching Economy
An economy plagued by financial crisis and high unemployment, remains a bitter truth, but Thanksgiving, Black Friday and Cyber Monday all have stories to tell, the story of regained consumer confidence that looked far stronger than the prior-year period. It seems that consumers who were saving up for the holiday season, shrugged off the economic gloom and went from shop to shop to grab the best available deal.
According to the data released by National Retail Federation (NRF), sales on the Thanksgiving weekend surged 16.4% to $52.4 billion. The survey also revealed that as many as 226 million bargain hunters visited stores and browsed the Internet over the past weekend compared with 212 million in the prior year. The average spending per customer rose to $398.6 from $365.3 in the prior year, over the four-day period from Thanksgiving to Sunday.
The economy, which was believed to be heading towards a recessionary downturn early in the year, has started looking up again. What’s more, consumer confidence remains high. Conference Board data suggests that Consumer Confidence Index rose to 56.0 in November from 40.9 in October, and attained the highest level since July, when the index touched 59.2. This is prompting consumers to loosen their purse strings.
Further, the data from the Commerce Department indicates that consumer spending, which represented 70% of the economy, increased at an annualized growth rate of 2.3% in the third quarter, reflecting the fastest rate so far in 2011.
What Comps Say…..
Record Black Friday weekend sales provided an impetus to the retailers’ November sales who tried all means to woo customers and gain market share amid fierce competition and sluggish economy. Total retail sales on Black Friday, which kicks off holiday sales, rose 6.6% to $11.4 billion according to the data released ShopperTrak. November comparable-store sales results are a significant indicator for the retailers, as it gives an insight of the days ahead.
The saying early bird catches the worm goes well with the retailer Macy’s Inc. (M) that for the first time opened its doors at the stroke of midnight on Black Friday to attract customers. The leading department store retailer in the U.S. saw its comparable-store sales rising 4.8% that fared better than what analysts expected.Online sales, which include sales from macys.com and bloomingdales.com, continued to show growth momentum in November, soaring 49.6%.
Comps for the luxury department store, Saks Incorporated (SKS) increased 9.3%, exceeding the estimate. Ross Stores Inc. (ROST), the off-price retailer of apparel and home accessories,witnessed a 5% growth in its comps.
Costco Wholesale Corporation (COST) sustained its sales momentum, and registered a comps growth of 9%. Excluding the effects of higher gasoline prices and foreign currencies fluctuation, Costco’s comparable-store sales climbed 7%.
Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, posted healthy sales results. The company’s comparable-store sales for November 2011 rose 7%, following an increase of 6% in October 2011.
In contrast, J. C. Penney Company Inc. (JCP) followed its old tradition of opening stores at 4 a.m. on Black Friday. The decision hurt its comparable-store sales that fell 2% compared with an increase of 9.2% in the year-ago period. However, the drop of 6.2% at Kohl’s comps sales during the month under review came as a surprise, particularly after it registered a growth of 3.9% in October.
The retail companies targeting lower and middle-class customers however had a tough time, as their target consumers remained frugal in spending or did selective shopping.
Target posted a 1.8% increase in comparable-store sales that missed analysts’ expectation, indicating that consumers still remain cautious. The company hinted that although sales surged on Black Friday, the rise was not enough to boost its November sales. The company now foresees an intense competitive and promotional environment in December.
We believe that retailers will leave no stone unturned to drive sales. But there’s a nagging fear that if recession-hit consumers decide to be cautious on their spending in this holiday season or if the economic crisis aggravates, the picture will only have dull colors. A pick-up in demand would definitely augur well for the economy.
Retailers are using different arsenals to fire on all cylinders. These include offering discounts and indulging in promotional activities, which are reflecting on their sales. But we wonder whether these are coming at the price of margins. Moreover, what impact will these have on the bottom line?
The sea doesn’t seem calm, waves are high and waters are rough. It is evident that customers remain sensitive to macroeconomic factors including high fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may affect their discretionary spending, and in turn curtail the sector’s growth and profitability.
Going by the pulse of the economy, we could see more competitive pricing and new products to attract shoppers in the holiday season. We believe that retail companies will move heaven and earth to win the hearts of bargain hunters and it definitely remains a wait-and-watch story as to who emerges successful in wooing consumers in this distressed economy.
Powered by Facebook Comments
Similar Posts: BBY | Best Buy Company Inc | COST | Costco Wholesale Corporation | economy | J. C. Penney Company Inc | JCP | Kohl's Corporation | KSS | Limited Brands Inc. | LTD | M | Macy's Inc. | NorthStar Realty Finance Corporation | NRF | Ross Stores Inc. | ROST | Saks Incorporated | SKS | Target Corporation | TGT | Financial | REIT - Retail
RSS feeds: BBY | Best Buy Company Inc | COST | Costco Wholesale Corporation | economy | J. C. Penney Company Inc | JCP | Kohl's Corporation | KSS | Limited Brands Inc. | LTD | M | Macy's Inc. | NorthStar Realty Finance Corporation | NRF | Ross Stores Inc. | ROST | Saks Incorporated | SKS | Target Corporation | TGT | Financial | REIT - Retail |