Widlitz: Retail and The Game of Chicken
Maybe this is just a game of chicken?
Who will panic first-the retailer or the consumer?
We all know that consumers wait until the last minute to shop.
We also have become conditioned to retailers hitting the markdown lever starting on Black Friday. And this year, Black Friday is arriving earlier than ever for many retailers (Turkey night for Target, Best Buy, Macy’s, Wal-Mart). Retailers want their fair share of the day that represents as much as 10% of holiday sales. Stretching out Black Friday most likely will not create incremental sales but retailers can hope.
So maybe it should not come as a surprise that consumers are pulling back just in time for the holidays. Despite muted expectations as we headed into the launch of Q3 earnings after disappointing October sales, retailers continued to disappoint over the past two weeks (Macy’s, Dillard’s, Urban, Ralph Lauren and Nordstrom.) Yes, there are even limits at the high-end. Scenes from the mall this weekend did not exactly give me the impression much has changed.
This weekend traffic was fair at best and light in many cases. But the good news is despite unseasonably warm weather, retailers did not seem to be hitting the panic button. That brings me back to the game of chicken idea.
Where there was traffic, the consumer was scouring the sale racks. But in most cases consumers seem to be waiting until retailers reveal their best deals closer to panic time. Yes, consumers have their own game of chicken.
While the malls were not overly promotional this weekend (wait there is still time) shoppers still had a decent selection to choose from. For example, Neiman was running 40% off on selected merchandise in everything from designer to cashmere. Nordstrom is running the half yearly sale. Bloomingdale’s just finished a 20% off promotion. Gap is running up to 30% off and the good news is color has finally made its way back into stores. In the teen space promotions seemed controlled as Abercrombie ran 30% off sweaters and 40% off jackets and vests. American Eagle ran flannel promotions and a selection of 40% off.
In the week ahead we will hear from the next wave of retailers including Target, Wal-Mart, JC Penney, Limited, TJX, GPS and Abercrombie. The big news will be from Wal-Mart; did comps remain positive in October? And is the company seeing the same glimmer of relief in the trade down trend they told us about at the analyst day back in October?
I am not expecting any turn-around news in the coming week. The October – Black Friday period is a transition period and consumers seem to be waiting longer and longer to make purchases each year in anticipation of the bigger better last minute deal. Retailers can thank themselves for training us well.
Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years.