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Holiday 2021: A Good Start, But What Happens Next?

·14-min read

What a difference a day can make.

Riding third-quarter momentum and with store traffic on the rise, Black Friday sales results were strong, supporting expectations for healthy holiday gains. The Macy’s Thanksgiving Day Parade also elevated holiday spirits since crowds could come out and watch in person, after being unable to last year due to COVID-19.

But since then, an undercurrent of concern has emerged. Several retailers and industry experts contacted Sunday seemed worried that if the new Omicron coronavirus variant spreads, it could impact the consumer psyche and dampen holiday spending. Speculation on the new variant drove the stock market down 1,000 points on Friday.

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On a more immediate basis, concerns that smash-and-grab robberies last week hitting Nordstrom, Louis Vuitton, Bloomingdale’s and other stores primarily on the West Coast would discourage visits to stores this holiday season were also evident. Inflation, particularly higher gas and food prices, and stockouts have been concerns for months.

For the weekend, it seemed like a sudden uncertainty got mixed in with the optimism that has pervaded retailing for most of this year. Next week’s “lull” in sales, which always happens after Cyber Monday and lasts till about 10 days before Christmas, adds to the uncertainty.

It’s a question of how deep the lull gets.

Business on Saturday was softer than expected and believed to be due to Friday’s strong turnout. Sources said it appeared more like a typical mid-November Saturday, in terms of sales and traffic, rather than a holiday weekend Saturday.

Fashion retailers said they had enough supply for the season, having ordered earlier in the year and having goods on reserve, though industry experts question whether there will be enough inventory in certain bestsellers to satisfy demand late in the season.

“There’s a lot of pent-up demand for both gift giving and personal consumption, and thanks to strong relationships with vendor partners and a stockroom filled with goods, the stores are not experiencing any inventory shortages,” said Bob Mitchell, co-chief executive officer of Mitchell Stores. “There are still concerns about COVID-19, but I’m confident we’ll have a double-digit increase for holiday.”

Adobe reported that total online spending in the U.S. on Black Friday was $8.9 billion, which was at the low end of the tech company’s predicted range and slightly lower than 2020’s $9 billion. Online sales on Thanksgiving Day were flat against last year, at $5.1 billion, marking the first time when both days did not see an increase in online spending, year-over-year. The results are attributed to consumers shifting their spending to earlier in the season in response to promotions and deals from retailers that started in October, and people getting back to shopping brick-and-mortar stores.

Adobe said that Cyber Week, which includes Thanksgiving Day, Black Friday and Cyber Monday, is still by far the strongest online sales days of the season. Cyber Monday is expected to be the biggest online shopping day of 2021, with between $10.2 billion and $11.3 billion in spending seen.

“For the first time ever, Black Friday saw a reversal of the growth trend of past years. Shoppers are being strategic in their gift shopping, buying much earlier in the season and being flexible about when they shop to make sure they get the best deals,” said Vivek Pandya, lead analyst at Adobe Digital Insights.

On Small Business Saturday, Adobe projected that consumers would spend between $4.5 and $5.1 billion online. So far this holiday season (Nov. 1 to Dec. 31) consumers have spent $89.9 billion online and are on track to hit $207 billion, affirming Adobe’s forecast. Adobe Analytics tracks over one trillion visits to U.S. retail sites, 100 million stock keeping units and 18 product categories.

Measuring brick-and-mortar and online sales, Mastercard SpendingPulse reported that Black Friday retail sales rose 29.8 percent versus 2020 through 3 p.m. EST Friday.

“Retail spending has been on the rise throughout the day and it speaks to the strength of the consumer,” said Steve Sadove, senior adviser for Mastercard and former CEO and chairman of Saks Inc. “We anticipate a positive holiday season well beyond Black Friday.”

Consumers have been flush with cash due to higher wages and government subsidies, eager to replenish their own wardrobes while buying gifts, and more willing this season to pay full price, rather than wait for deals and risk stockouts.

Retailers were also aided by a drop in temperatures lifting sales of winter-related apparel and accessories. Services, notably buy online, pick up in store; buy now, pay later, and same-day delivery also factored into the positive results for the weekend.

“Big picture, I feel great,” said Ken Ohashi, CEO of Brooks Brothers. “Like a lot of retailers, we pulled up our holiday selling to the beginning of November, and we saw sales pick up.”

On Thanksgiving Day itself, he said, the e-commerce site performed strongly since all the stores were closed and “it wound up a big day for us.”

Paige Thomas, president and CEO of Saks Off 5th, said, “Our merchandising strategy for the holiday season really shined this Black Friday…Category standouts included jewelry, handbags and fragrances, while active and casual wear for women and men remained strong as they have been throughout the year. I’m particularly pleased with the performance we saw in our app, which was newly launched this spring,” and drives traffic to both stores and the website.

Neiman Marcus reported that on Friday and Saturday, store traffic was up high double digits compared to last year’s Black Friday weekend; sales in stores were above pre-pandemic levels, and categories outperforming pre-pandemic levels in total were gifts, home, jewelry, outerwear, children’s, men’s and handbags. Neiman’s also reported that its selling associates engaged in almost triple the number of remote selling sessions this Black Friday weekend compared to last year, utilizing the company’s Connect technology.

The weather was colder through most of the country over the weekend, fueling sales of seasonal merchandise. “Winter apparel, blankets, hot food and drinks, heaters and firewood were all up significantly. It really comes down to being able to proactively allocate goods from a weather perspective, which this year would be very different than last year,” said Evan Gold, executive vice president of Planalytics.

In the New York City area, last weekend was in the low 40s on average, 11 degrees colder than last year. Chicago, which averaged 33 degrees during the weekend, was nine degrees colder than last year. A few inches of snow in places like Cleveland, Detroit and upstate New York “didn’t stop people from getting out. It puts them in more of a holiday mind-set,” said Gold.

Black Friday foot traffic was “phenomenal,” said Michael Kaufman, the general manager for College Square Mall in Cedar Falls, Tenn.; Foothills Mall in Fort Collins, Tenn.., and Governor’s Crossing outlet center in Sevierville, Tenn. The three properties are owned by Time Equities which contracts with Urban Retail Properties to manage certain malls.

“Compared to Black Friday 2020 and even 2019, we are by far exceeding our actuals,” said Kaufman, referring to reported sales from retailers.

Lines formed at stores at the College Square and Foothills malls on Black Friday, which didn’t happen a year ago. “Last year the crowds starting coming into the malls at 10 or 11 in the morning. This year we had crowds at 7. It was a backlash from last year when people were a bit apprehensive about being around lots of people.”

Kaufman also said reports of supply chain issues have driven sales, especially on Black Friday. “People are leery about shopping later and leery of shopping online. They are afraid that inventory supplies will be depleted. I see double-digit increases in sales versus last year and in most cases strong single- to even double-digit increases compared to Black Friday 2019.”

Among the busiest stores, according to Kaufman, were T.J. Maxx, Finish Line, Maurices, Shoe Dept. Encore, American Eagle Outfitters and Bath & Body Works.

“It was not a boom or bust weekend. It was both a boom and bust,” observed Craig Johnson, president of Customer Growth Partners. Because many major retailers kept stores closed Thanksgiving, “You had all this pent-up demand that seeped into Black Friday. Malls were much less crowded on Saturday. It was almost like a regular mid-November Saturday. I think Cyber Monday will be fine, but not a record-setter.

“I’m a little worried by the demand pulled forward for the rest of the weekend and the month. There will be a pretty significant early December lull,” said Johnson. “Our forecast for 6.7 percent year-over-year sales growth is staying the same. Forecasts in the 10 percent neighborhood are less likely to be reached. It’s a moving dynamic. Super Saturday will be a bit muted. Being the 18th of December is not ideal.”

CGP analysts were in the field over the weekend. “We talked to customers and we heard nothing about Omicron on Friday. It’s possible in the next few days and with travel bans starting, it may pop up more in the general consciousness,” said Johnson. “More of a factor in Saturday and Sunday being slower is this crime situation. This is significant, depending on what part of the country you are in.”

Johnson singled out the teen sector, consumer electronics, home furnishings, and department stores as strong over the weekend, though women’s apparel was relatively weak, with the exception of athleisure. He said Black Friday’s sales totaled a record $34.9 billion, reclaiming its relevance as the key retail milestone on the way to Christmas week, and up 18 percent from Black Friday 2020’s COVID-19-impaired $29.7 billion, and 12 percent above the prior record of $31.2 billion set in pre-pandemic 2019.

Bill Brand, CEO of Rue21, said Black Friday traffic and comp sales were strong compared to last year, and strong compared to 2019 but not as high. “Sweaters, jeans, T-shirts and loungewear are the four big must-haves. We also focused our main fashion story around party dresses and dressy tops. Inventories are in a good place. We pulled up orders. We were ahead on back to school. We are not worried about inventory at this point. We are right where we need to be in terms of inventory.”

“Most of the retailers had 2019 traffic levels or better on Black Friday,” said Stephen Lebovitz, CEO of CBL & Associates Properties, a real estate investment trust based in Chattanooga, Tenn. Saturday was “stronger than a normal Saturday” but business at CBL centers in college town markets could have been distracted by college football games.

“Business definitely settles down over the next week and starts to rebuild as we get closer to the holiday,” said Lebovitz. “Christmas is a Saturday so we lose that weekend, but there is lot of after-Christmas business, with returns and gift cards. So we feel good. Most inventory levels for retailers seem to be strong. They’re not having a lot of issues, staffing is tough but retailers seem ready for a big season.”

He cited Bath & Body Works, Aerie, American Eagle, Offline, Buckle, Macy’s, Dillard’s, Belk, Dick’s and Scheels as performing well, among other stores.

At Brooks Brothers, the most popular category by far was sportswear such as Portuguese flannel sport shirts, cashmere merino sweaters and cable-knit hoodies. Even the more-tailored categories such as neckwear, which CEO Ohashi said has been “steadily improving,” and dress shirts, which benefitted from a successful “four for 40 percent off,” rebounded over the weekend.

Ohashi said Brooks hasn’t been overly impacted by the supply chain issues, although blue and white dress shirts were out of stock for four weeks earlier this fall. “We hit a low point in our stock [position] in September/October,” he said, “but it’s steadily improving.”

As a result, Ohashi is upbeat about the remainder of the holiday season. “I feel good about hitting our overall plan for the year,” he said. “It’s not over, we still have December, so we have to keep our foot on the gas.”

Damien Huang, CEO of Eddie Bauer, said that despite some initial concern that the strong sales the company had been experiencing might drop off over the holiday weekend, that wasn’t the case. “We’re having a very good week,” he said. “Our digital business exceeded last year and our stores are far ahead of last year.”

The business tried to bring in as much product as possible early, but Huang acknowledged “we continue to struggle with inventory shortages.” The company is asking customers to pre-order now with deliveries scheduled in two to three weeks.

The top performer for the company is outerwear such as women’s fashion parkas and duffles as well as down and insulated coats, many of which are being pre-ordered. Accessories, lined bottoms, training tights, fleece, faux shearlings and shirt-jackets, which were late in arriving, have also emerged as “a strong trend item.” Men’s outerwear is also popular, with down, synthetic insulated coats, snorkels, waterproof parkas and workwear such as lined bottoms, heavy flannels and chamois shirts all popular.

Overall, the chain was less promotional than in the past, but still more promotional than Huang likes. “But we’re seeing strong margin results.”

Mitchell of Mitchells Stores said sales started to soar “substantially” in November, resulting in double-digit increases. “We’re seeing a lot of people shopping early,” he said. And they’re visiting the physical stores. Even though e-commerce is “dramatically ahead,” the company made a big push through “digital outreach,” and it resulted in strong foot traffic.

“Everyone is very upbeat and wants to spoil their loved ones,” he said.

As a result, luxury brands such as Brunello Cucinelli, Loro Piana, Zegna and Kiton were all top performers. Women’s handbags were up 30 to 40 percent over 2019 levels, jewelry is “super strong,” sportswear achieved “massive increases,” and tailored clothing is even rebounding.

He said customers are embracing luxury brands and buying less, but opting for higher quality, which hits “the sweet spot” for Mitchells.

Specifically, the “dressier part of the business is coming back,” he said, citing women’s designer and special occasion dresses as standouts. But at the same time, casualwear is also strong. “We’re selling dress shoes and high heels, but sneakers also continue to grow.

Ken Giddon, president of Rothmans, said this past weekend was “the best I can remember in terms of energy and positivity. People have discretionary income and appreciate that we have inventory. They’ve been conditioned to think we won’t have stock, but with the exception of a few odd items like tuxedos, we’re in pretty good shape.”

He said men are “actively looking for clothes to go back to work” A post-COVID-19 world will require something between sweatpants and suits, so Rothmans is selling a lot of denim and denim alternatives as well as sport coats.

“They’re tired of wearing the same old V-necks so we’re selling interesting sweaters and wovens. They want dressier things that are comfortable,” Giddon said.

As a result, he’s quite upbeat about the overall holiday season. “People are out shopping and I think it’ll be a very strong Christmas,” Giddon said.

Shopify Inc., the e-commerce platform for retailers around the world, reported that Black Friday sales soared to nearly $2.9 billion, a 21 percent increase over Black Friday in 2020 and a 75 percent increase over 2019. Collectively, merchants on Shopify generated peak sales of nearly $3.1 million per minute at 12:02 p.m. EST on Black Friday, and merchants crossed $1 billion in sales by 4 a.m. EST, four hours earlier than Black Friday in 2020.

“Every year, Black Friday represents one of the largest single-day sales moments for entrepreneurs around the world, and this year it was bigger than ever,” said Harley Finkelstein, president of Shopify. “From in-store retailers, to online, and even viral TikTok must-haves, these Black Friday sales show that independent businesses are having a massive impact on global commerce. Consumer support of independent brands is at an all-time high.”

WHAT’S BIG FOR HOLIDAY 2021

* Key services: buy online, pick up in stores; buy now, pay later; same-day delivery

* Full-price purchasing: consumers less resistant, not holding out as much for deals

* Surgical shopping: shoppers stick to gift lists and get in and out of stores quickly

* Apparel and accessories for gifts and self-purchases as consumers refresh wardrobes and go out and celebrate. Gift cards high on shoppers’ lists, too.

* Earlier shopping: consumers respond to holiday discounting as early as October.

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