Department stores came into the holiday season with high hopes, particularly as initial online Thanksgiving weekend numbers indicated that sales would be plentiful. However, recent holiday sales reports from Macy’s and Kohl’s reveal that though their expectations were great, the reality was anything but. However, one major retailer, Target, actually surpassed expectations.
Macy’s saw shares drop as much as 19% on Jan. 10, after the retailer unveiled November-to-December same-store sales only increased 1.1%, with a lull occurring in the mid-December period. CEO Jeff Gennette said holiday sales disappointed in sportswear, sleepwear, jewelry and cosmetics, and Macy’s now expects no net sales growth for fiscal 2018, scaling back initial projections of 0.3% to 0.7% growth. The company also dialed back its earnings per share range, from $4.10 to $4.30 to $3.95 to $4.00.
Ironically, Macy’s posted the same 1.1% number last year. However, a flurry of digital transformation investments in 2018 (including the acquisition of STORY, the funding of b8ta, the opening of The Market @ Macy’s pop-ups and the implementation of VR and AR in stores) apparently failed to move the needle on sales.
Macy’s “also suffered from execution issues in its promotional strategy and fulfillment,” according to Christina Boni, Department Store analyst at Moody’s. “Macy’s is addressing the shortfall in January and is now anticipating gross margin to be lower than originally anticipated as it takes actions to ensure clean inventories.”
Kohl’s 1.2% same-store sales increase for the November-to-December period also represented a big disappointment, since the retailer achieved 6.9% growth during the same period last year. In tune with the results, Kohl’s stock fell as much as 9.5%
The numbers haven’t discouraged the Kohl’s team though; the department store is actually increasing expectations for fiscal 2018 earnings per share to fall within a range of $5.50 to $5.55, up from a prior range of $5.35 to $5.55.
Target Outpaces Holiday Sales Growth Via Store Investments, Expanded Delivery
While Macy’s and Kohl’s saw only slight increases in holiday same-store sales, Target holiday sales growth jumped 5.7%. The retailer outpaced the 3.4% growth rate from the same period in 2017 and capped off the company’s anticipated best full year of sales growth since 2005. The sales increase is a major sign that Target’s investments across its stores and private label products, e-Commerce site and fulfillment models caught the consumer’s eye ahead of the season.
Target’s acquisition of same-day delivery service Shipt in late 2017 surely has had an impact on the retailer’s ability to handle and promote its omnichannel fulfillment initiatives. During November and December, Target said:
- Digital sales were up 29%;
- Online orders fulfilled through either in-store pickup or curbside pickup services increased 60%; and
- In-store pickup and/or curbside pickup accounted for roughly 25% of online sales.
In line with the holiday results, Target maintained its Q4 outlook, with expectations of adjusted earnings per share remaining between $5.30 and $5.50.
Department stores could probably still learn a thing or two from Target’s aggressive push to remodel its bigger stores, open smaller-format shops in certain cities and add more in-house brands. For Target, these decisions “are helping it compete with the likes of Walmart in terms of prices, the department stores in terms of merchandising, and Amazon in terms of delivery, ” Telsey Advisory Group analyst Joseph Feldman said in a note to clients.
Retail TouchPoints will be publishing a more complete “Holiday by the Numbers” roundup later in January.