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Holiday Season Concludes With a Gleam of Hope, Sales Rise 8.3%

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In spite of challenges associated with the coronavirus pandemic and reimposition of restrictions in some states, the holiday season was quite encouraging. Though there were apprehensions regarding how comfortable consumers would be in terms of purchasing at a time fraught with high unemployment and lower disposable income, Americans showed resilience.

National Retail Federation’s (NRF) chief economist Jack Kleinhenz said “Consumers shifted into high gear in December, giving the holiday season a strong finish that could be a good sign for the continuing recovery of the economy this year.”

Even retailers prepared for an unusual festive season by undertaking steps to provide a safe and convenient shopping experience, predominately online. Markedly, customers consolidated their trips and majorly shopped at big-box stores that provide a differentiated product range under one roof. Customers purchased everything they needed, be it holiday gifts and toys, food, home décor, activewear or other essentials.

Holiday Season Stronger Than Anticipated

According to the data released by NRF, holiday retail sales, excluding automobile dealers, gasoline stations and restaurants, increased 8.3% year over year to $789.4 billion. Notably, the number exceeded NRF’s holiday sales projection of 3.6-5.2% growth during November and December period, and also comfortably outpaced 2019’s modest gain of 4%.

Meanwhile, the retail trade group also highlighted that online and other non-store sales surged 23.9% to $209 billion during the festive season, defined as Nov 1 through Dec 31. The group had forecast an increase of 20-30% in online and other non-store sales for the period.

Notably, strong performance across building materials and garden supply stores, sporting goods stores, grocery and beverage stores, health and personal care stores, furniture and home furnishings stores contributed to overall holiday sales. However, sales at general merchandise stores, electronics and appliance stores, and clothing and clothing accessory stores were disappointing.

Amid a tough operating environment, rise in holiday retail sales is good news for retailers. Industry experts pointed that consumers have been cutting expenditures on pandemic-sensitive services such as travel, entertainment or outdoor dining, and redirecting the same to retail space. They even might have been tapping their savings that helped boost consumption activity.

Retailers’ Holiday Sales Report Card

Discount retailer, Target TGT informed that comparable sales in the combined November/December period increased 17.2%, backed by 12.3% jump in average ticket as consumers consolidated trips. lululemon athletica LULU, a healthy lifestyle inspired athletic apparel company, provided upbeat guidance for fourth-quarter fiscal 2020 after witnessing a robust performance in the holiday season. The company now expects sales and earnings to be at the higher end of the previously issued range. It earlier predicted sales growth of mid-to-high teens and adjusted earnings growth of mid-single digits for fourth-quarter fiscal 2020.

Five Below FIVE, the extreme-value retailer for tweens and teens, highlighted that net sales for the holiday Period — from Nov 1, 2020 through Jan 2, 2021 — surged 21.1% to $722.3 million. We note that L Brands LB, a specialty retailer of women's intimate and other apparel, posted strong holiday sales results that exceeded management’s initial expectations. Strength in the Bath & Body Works segment and improved Victoria’s Secret performance aided the upbeat outcome. Comparable sales for the nine-week period ended Jan 2, 2021, increased 5%.

Again, Zumiez ZUMZ reported comparable sales increase of 1.7% for the 10-week period ended Jan 9, 2021. Meanwhile, total sales dipped 0.7% during the holiday period for this specialty retailer of apparel, footwear, accessories. Nordstrom JWN, one of the leading fashion retailers, witnessed dismal holiday sales performance. Sales declined 22% year over year for the nine-week period ended Jan 2, 2021.

Wrapping Up

No wonder, the holiday season, which accounts for a sizeable chunk of yearly revenues, is a make or break for retailers. Taking into account consumers’ product preferences and growing inclination toward online shopping, due to social distancing, and greater stay at-home and work-from-home trends; retailers replenished shelves with in-demand merchandise and ramped up investments in digitization.

Retailers have been directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, be it curbside pickup or delivery at home. Notably, companies deployed reasonable number of seasonal associates to deal with curbside and in-store pickup of online purchases.

NRF President and CEO Matthew Shay said, “Despite unprecedented challenges, consumers and retailers demonstrated incredible resilience this holiday season.” Matthew Shay stated “We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, further aid for small businesses and tools to keep businesses open, will keep the economy growing.”

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Target Corporation (TGT) : Free Stock Analysis Report
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