Holiday Sales Increased 3.8 Percent, In Line With NRF Expectations
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
While the NRF is optimistic that holiday sales reveal a growing economy, many retailers face dwindling profits from aggressive promotions
The NRF reported Tuesday that December retail sales came in as expected: sales increased 3.8 percent to $601.8 billion, only a tiny bit less than the NRF’s projected 3.9 percent to $602 billion. For the month, sales excluding restaurants and automobiles increased 0.4 percent. Online and e-commerce sales hit 95.7 billion, roughly a 9 percent increase over last year.
Matthew Shay was particularly upbeat in his discussion of the results, saying: “Despite facing a truncated holiday season, severe weather, and shaky consumer confidence, retailers rose to the challenge and executed their strategies with proven success. Today’s holiday sales numbers are a testament to a resilient industry that knows what their customers want, when they want it, and how they want to get it. Considering that retail sales are an important barometer when measuring the overall health of our national economy, this report provides a level of true optimism that the recovery is picking up steam, and once again, retail leads the way.”
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However, while sales increased over the holiday because of retailers’ skills luring customers in with discounts and promotions, the NRF does acknowledge — as many retailers are also currently discovering — that this was a tricky holiday for profit margins. NRF chief economist Jack Kleinhenz acknowledges that, “Undoubtedly, some the increase came at the expense of margin. Retailers are still stressed and a long-term promotional environment actually hurt the bottom line.”
While the NRF remains optimistic that, as the economy recovers, retailers won’t need to rely on promotions to draw customers, there currently are a lot of retailers limping out of this recent promotional holiday season. Because of the strategies of large retailers like Amazon and Walmart, both of which began offering deals earlier in the season this year, many retailers found they too, needed to be aggressively promotional. Morgan Stanley estimated that promotions during the final week were roughly 10 percent deeper than they were last year. Last Friday, Reuters reported that many retailers, including L Brands, Family Dollar, and Zumiez, slashed their earnings forecasts because of the profit-harming discounts they offered during the holidays.
And, despite the excessive promotional atmosphere to get people into stores, retailers aren’t necessarily happy with the season’s traffic levels. Cowen and Co analyst John Kernan told Reuters, “Not only were people more promotional this year, giving away more margin, but it didn’t generate the incremental traffic they would have expected.” Indeed, last week, ShopperTrak estimated that sales rose 2.7 percent for the season, but said foot traffic through stores decreased 14.6 percent compared to last year’s holiday shopping season. Of course, ShopperTrak doesn’t take into account online sales, and considering the startling amount of last minute rush orders that hit delivery companies this year, it’s safe to say retailers most likely saw some traffic being diverted from stores to the online channel. As ShopperTrak founder Bill Martin told Reuters, more customers chose to avoid the cold and carried out their browsing online, which took its toll on in-store foot traffic. Martin says, “It’s a result of more and more technology in the hands of the consumer, which allows them to virtually window-shop.”
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