Retailers try to get
Holidays could play difference-maker in consumer attitudes
shoppers past their post-recession caution about buying.
For years now, retailers decking their halls for the crucial holiday season have been waiting for shoppers to shed the tentative attitude about spending that became entrenched in the recession.
Recent data show that consumer spending and consumer confidence are on the rise, and forecasters have released relatively upbeat predictions for how sales will grow during the November and December shopping crush.
Yet, the most recent snapshot of how the retail industry is faring — delivered in the form of a flurry of quarterly earnings reports in the past weeks — suggests that customers are still cautious.
Retailers ranging from Urban Outfitters to Dillard’s saw their stock sink last week after they rang up disappointing sales during the quarter that included the back-to-school shopping season.
Dick’s Sporting Goods said last week that it is canceling some orders and working with vendors to return products that have not been selling well after a rough fall quarter left it with bloated inventory.
The chain blamed unseasonably warm weather, saying sales were especially weak in outerwear, fleece and items such as compression clothing that football or soccer players might layer under their uniforms in colder temperatures.
Macy’s also partially attributed its 5.2 percent plunge in sales to temperatures that did not make shoppers eager to spring for new coats and boots.
Nordstrom, however, did not try to pin its disappointing quarterly performance on weather — executives said its coat business was relatively strong. Instead, the chain summed up its lousy sales this way: “We’ve got less people buying clothes this quarter than we expected, and there’s really nothing else to point to,” James Nordstrom, the company’s president, said on a conference call with investors.
Still, many forecasters expect that consumers will deliver sales growth to the industry of somewhere between 3 and 4 percent. A survey conducted by consultancy Deloitte found that 75 percent of shoppers plan to spend more this holiday season than they did last year, the largest share to give that response since 2000.
In minutes released last week from the Federal Reserve’s Federal Open Market Committee’s October meeting, members didn’t seem worried about consumers, writing: “Notwithstanding the disappointing retail sales data in September, participants were encouraged by the solid pace of consumption growth in the third quarter and generally expected consumer spending to rise moderately going forward. Gains in employment and income, low gasoline prices, and a high level of consumer confidence were viewed as factors that should support consumer spending.”
Some retailers’ results offered evidence that customers are indeed willing to open their wallets.
L Brands, the company that owns Victoria’s Secret and Bath & Body Works, said last week that it was raising its outlook for fullyear earnings after its revenue jumped 7 percent in the most recent quarter. The company registered record back-to-school spending at Pink, the Victoria’s Secret offshoot aimed at a younger shopper, and growth at Bath & Body Works on everything from home fragrance to hand sanitizer.
TJX, the parent company of T.J. Maxx, also delivered solid sales growth, as did Home Depot and Lowe’s.
Some of the other gloomier numbers from the latest earnings reports seemed to more reflect the specifics of certain businesses.
Best Buy gave a muted outlook for the fourth quarter, but that seems to be more about changing dynamics in the electronics category, where sales of tablets and mobile phones have slowed industrywide as the market becomes more saturated.
Gap trimmed its profit forecast, but the apparel giant has struggled to reinvigorate itself as its clothes have become less stylish and as consumers have found the quality lacking.
The varied earnings results and data offer mixed signals about how merry the holidays will be for the retail industry.
“The consumer is reasonably strong, but I think they’re still cautious and they’re looking for value, and they’re looking for unique buys,” said Christian Brickman, the chief executive of cosmetics chain Sally Beauty, on a recent conference call with investors.