2019 Holiday Retail Forecast

Holiday Magic Is Just an Illusion for Many Retailers

Retail & Consumer Products | Corporate Finance & Restructuring

November 22, 2019


For those of us who can remember a time when broadcast coverage of the Rockefeller Center tree lighting wasn’t followed by a Victoria’s Secret lingerie show, it’s obvious that the holiday season isn’t what it used to be.

The season starts earlier and ends later than it used to in decades past. The lament of middle-aged folks complaining about Christmas commercials or music in October has become a familiar refrain. Holiday shopping has become less intense and frenzied. Nobody seems like they are shopping in panic mode anymore. Gift cards often have replaced thoughtful gift-giving, and their usage has extended the holiday season well into January. Malls and stores generally are less crowded on Black Friday weekend, with store traffic down by mid-single digits last season. Checkout lines move more quickly. Christmas shopping also has become a more solitary and personalized experience rather than a socializing activity or get-together.

Online shopping has made holiday spending less weekend-concentrated. Last minute shoppers can buy online with less concern of disappointment. Returns are less of a hassle. Some fair share of shoppers will brag to friends that they hardly stepped foot in a mall this holiday season. These myriad conveniences are made possible only by the enormous efforts and investment of primarily store-based retailers over the last decade to accommodate the many whims of shoppers, who have done little to return the favor in any meaningfully pecuniary way. Instead, they have turned their shopping loyalties elsewhere. Consequently, retailing is a far more complex and less profitable enterprise than it used to be. The only unambiguous winners are shoppers—and Amazon.

The two months comprising the holiday season have traditionally been the make-or-break period for retailers. We don’t mean to downplay its importance, but as we consider the profound challenges and tortuous transition still confronting the retail sector today, the import of a holiday season that’s a bit better or worse than expected seems almost inconsequential in the bigger picture. It’s unlikely to alter the trajectories of those chains on their way to irrelevance. Moreover, the bucks we spend to please our loved ones are increasingly directed towards fewer retailers, meaning that the aggregate success of the season has less bearing on the outcomes of its many constituents. Retail prosperity has become more selective and less shared among its participants. More than ever it seems, the retail sector is segmented hard between leaders and laggards. The technologies that were expected to propel traditional retailers in the 21st century have also created new impediments to greater prosperity for the enterprise. Recently, The Gap’s sharp takedown of earnings guidance for FY19 and the resignation of its longtime CEO are another harsh reminder that it requires more than online success to make the cut.

Forecasting holiday sales has always been something of an abstract exercise, and against the sobering backdrop we’ve described it seems less connected to the health of the retail sector without some additional insight. So, let’s provide that.

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