November sales a mixed bag for US retailers
US shoppers appear to be loosening their purse strings for the holidays
US retailers posted a mixed bag of results in November, with earlier opening hours and Black Friday bargains helping to drive consumer traffic over the Thanksgiving weekend for some, but tougher comparisons with the year-ago period and weaker sales during the rest of the month weighing on others.
Black Friday is the biggest shopping day of the year and the traditional start to the holiday shopping season, so November retail sales are watched closely for first signs of how the holiday season is likely to pan out.
This year same-store sales growth slowed to 3.3% during the month, according to Kantar Retail, coming in weaker than the 3.9% same-store sales gain last month and the rise of 5.6% in November last year.
"Retail sales growth into the holidays reflects the spending intentions of shoppers," said its senior economist Frank Badillo. "They have pulled back on their spending plans from earlier in the year, but they are loosening the purse strings a bit as the holiday approaches.
"As a result, sales growth should not slow much more but will likely remain focused on holiday deals as some household budget concerns persist."
But while the Black Friday results are an important gauge of people's willingness to spend - and so far seem to be boding well for the three weeks leading up to Christmas - the reality is that the Thanksgiving weekend represents just 10% of total holiday shopping volume. And Black Friday itself is responsible for just 5-6% of total November retail sales.
With competition for holiday consumers already fierce, efforts to try to woo the first shoppers this year saw Target, Macy's, and Kohl's all open at midnight on Black Friday, the day after Thanksgiving.
But even this had mixed results. While the strategy appeared to pay off for Macy's, Kohl's was one of one of the month's biggest losers. Discounter Target Corp also said that while its midnight opening helped boost sales on Black Friday, the rest of the month was hurt by comparisons with a strong performance last year.
And JC Penney admitted its decision not to open until 4:00am on Friday "adversely impacted" Black Friday sales. "Sales remained soft in-store throughout the holiday weekend," it said, adding that until then, sales throughout November had been ahead of the prior year.
Other retailers who struggled during the month included clothing specialist Gap Inc, while Saks Inc, Victoria's Secret operator Limited Brands, and denim specialist Buckle joined the list of those reporting better-than-expected same-stores sales in November.
First figures suggest total retail sales for the weekend reached an estimated $52.4bn, up from $45bn last year, according to the National Retail Federation - with a record 226m shoppers visiting shops and websites over Black Friday weekend. And more than half (51.4%) bought clothing and clothing accessories, it said.
The challenges now facing retailers include worries that deep discounting so early in the season will have brought some sales forward from December, and that with shoppers clearly in a promotional mindset, then steep discounts will need to continue in order to drive customer traffic in December.
This could put additional pressure on already-vulnerable profit margins.
"This is just the start of the holiday selling season and we expect December to remain fiercely competitive and highly promotional," confirms Glenn Murphy, chairman and CEO of Gap Inc, whose same-store sales tumbled 5% in November.
Target's chairman and CEO Gregg Steinhafel agrees that December will be "a competitive and promotional environment as consumers continue to focus on value."
"Despite our sluggish economy, shoppers proved they are looking for value and ready to buy if given a good customer experience," said Bill Martin, founder of ShopperTrak, which monitors retail and mall traffic. Its research suggests Black Friday 2011 set a new retail sales record, with sales rising 6.6% over last year to $11.40bn.
However, with consumers still extremely value-conscious, it remains to be seen whether they will sustain this behaviour through the holiday shopping season.
"Given a strong Black Friday, however, and the possibility of a drop-off in the coming weeks, retailers will need to work extra hard to convert knowledgeable browsers into buyers," Martin said. Especially since retailers rely on the sales between Thanksgiving and Christmas to make up 20% of their annual take.
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