Black Friday discounts 'aren't as deep as they were in the past': Fmr. Saks CEO

Steve Sadove, Mastercard Sr. Adviser & former Saks Chairman and CEO, joins Yahoo Finance Live to discuss retail trends for Black Friday and the holiday shopping season as inflation and supply chain worries weigh on retailers.

Video Transcript

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EMILY MCCORMICK: This year's holiday shopping season is setting up to be a busy one. Mastercard SpendingPulse data expects US retail sales during Thanksgiving week alone will grow by 10% over last year, and by 12.2% compared to the same week in 2019 as consumers' pent up demand continues into the start of the holidays.

For more, we're welcoming into The Stream Steve Sadove of Mastercard, Senior Advisor and former Saks Chairman and CEO. Steve, thank you so much for joining us this afternoon. When you take a look at the data in this report, what categories of products are you seeing as having the highest demand during this Thanksgiving week, as well as the broader holiday shopping season?

STEVE SADOVE: Well, great being on with you, Emily. You know this is a very strong holiday season. As you said, we're talking about 10% growth during the Thanksgiving week. We're looking at a 7 and 1/2% growth for the whole holiday season.

Some of the categories that are looking terrifically strong are apparel, luxury, jewelry. Restaurants are doing well, people are getting back out. It's the back-- it's the recovery of the economy trade that is doing really well.

People were in their homes for so many months. So now apparel, they want to go and try and get something new. They want to go to a restaurant. They want to treat themselves to something like a piece of jewelry or luxury. So the consumer is healthy and this is across the high end as well as the lower end of the market. So it really is a very good economy and it's interesting.

It's a little bit about the brick and mortar doing well again, but the e-commerce also doing well. We saw the e-commerce business grow 50% during the pandemic, from about 12% of commerce to 18% of commerce. So we're seeing growth and the recovery of brick and mortar. But we're still seeing a 7% growth out of the digital business.

JARED BLIKRE: And are you still expecting Black Friday to be a thing? And let me just say I point out a trend that-- I think it's so merciful that retailers are closing on Thanksgiving and it's actually becoming about Black Friday once again. But is this just an arbitrary piece of or date with the rise of digital communication and shopping? Is it still relevant?

STEVE SADOVE: Oh I think it's still relevant. It's clearly not as important as it used to be many years ago. But it's a signal, it's an emotional signal about the holiday season. And we're expecting to see Black Friday somewhere in the range of 20% growth versus year ago, which is an indicator of the consumers getting back into the stores.

And your comment about stores closing on Thanksgiving day is really important. I remember when I was running Saks. That was during the time when everybody felt they had to start opening early and on Thanksgiving day. And now you're back to an environment where people are able to spend more time with their families.

But on Black Friday you're starting to see doorbusters again. The discounts aren't as deep as they were in the past. My guess is you're seeing five to ten percentage points less discounting going on in the environment. Partly because inventories are in line and partly because of supply chain issues. You're seeing a lot of key items selling early. People are getting out there and getting the items quickly because they know that they're going to be running out of stock.

But Black Friday is an emotional-- You know this is the kickoff to the season in a sense, although the season really has started so much earlier. I look at it mid-October a year ago, you saw the Amazon Prime Day in early, call it the 11th of October. I'm now looking at a middle of October. That's why the Mastercard SpendingPulse forecast for the holiday season really does start in that mid-October type of a time frame. But I still look to Black Friday as being emotionally significant.

EMILY MCCORMICK: And Steve, to your point about the discounts perhaps not being as deep this year. Is this retail sales growth, this 10% growth that you're talking about on a year over year basis, going to come from actual higher volumes of units sold, or is a lot of this increase actually coming from higher prices and inflation?

STEVE SADOVE: Oh I think you're seeing a combination of both. Clearly there's an inflationary impact. Last month we saw 6% inflation. Some portion of the 10% growth is going to be inflationary, but the bulk of it is real growth and a recovery of the consumer. We've been seeing mid-single to mid to high single digit growth, ex auto and gas, over the last number of months. And so that's indicator, indicative of real growth in the consumer.

Some of it at the lower end is the you've had the government support programs. At the higher end you've had a very strong, healthy stock market that's driving some of the demand. But this is real demand, clearly pricing and those companies and brands that have consumer price power are taking pricing, but their costs are up substantially as well. But I would say that there's probably going to be a good season for the retailers, driven largely by volume increases but pricing a piece of the action.

JARED BLIKRE: And I'm digging through your report here, looking at some of the numbers for sales growth. And even versus-- not just last year but versus 2019-- some of these numbers are pretty eye-popping. I'm looking at e-commerce. Those are up 50% over the last two years. Apparel up 56% over the last year, over the last two years still up 21%. Luxury, excluding jewelry, up 92% over the last year. So what-- paint a picture for us. What is this telling you about the American consumer?

STEVE SADOVE: Oh, I think it's telling us that the consumer is very healthy. And you're right, it's sometimes not as good to look at just the year ago numbers, but you want to look at the two year ago number. And across categories, whether it's that luxury number growing 17% versus two years ago. Restaurants, restaurants are up in the 20s versus two years ago. So these are really health-- telling us that the consumer has money in their pocket. They're saving, they're spending and they're spending across a wide range of categories. Electronics are doing well, jewelry is doing very well.

I think the one that in some ways surprised me the most is department stores. Think about department stores-- over many years were on a secular decline in the last periods of time. This year we're seeing growth versus 2019. So whether it's any of the major-- you've had consolidation in that industry, but the department stores are growing very nicely.

I think the interesting thing for categories like that is consumers want to get out there, getting back into the stores. And now it's up to the stores to deliver the experience that the consumer is going to like. So that they're going to want to keep going back because there's this pent up demand. And now they have to have the service, they have to the products. They have to have the offering that's going to want to make them stick with it.

So you have this one time opportunity in this recovery economy for stores to show that they've changed. They've differentiated themselves, they have unique products for the consumer to keep wanting to come back.

EMILY MCCORMICK: And Steve, it sounds like you think that the demand is there on the consumer side. But are the companies going to be able to keep up with this demand? Could that 10% increase have been even higher if some of these supply chain disruptions and inventory concerns weren't there this year?

STEVE SADOVE: I think that's a fair question. And I think the answer is probably yes. What you'll see is a lot of substitution going on. So if you can't find that item that you want, you're probably going to substitute a different piece of apparel, let's say, or some other categories. So I do think that the supply chain issues are going to dampen to some degree, very modestly.

I think overall the fundamental growth that you're seeing driving this call it 10%, growth during the Thanksgiving week and 7 and 1/2% growth over the holiday season is real. And that it's in that kind of range despite the supply chain issues. But I-- supply chain-- we should not underestimate that supply chain is a major disruptor to the ecosystem. Labor is an issue as well.

JARED BLIKRE: Some really eye popping numbers there. Thanks for stopping by and sharing that, Steve Sadove of Mastercard, Senior Advisor and former Sachs Chairman and CEO.