Total retail sales growth warmed up in the 2019 holiday, but some channels were left out in the cold. Shoppers shunned most in-store specialty and department store channels in favor of online and select mass retailers.
The mixed holiday performance has already triggered a few retailers to announce store closures. With signs of sluggish spending plans to start the new year, more closure announcements are likely as other retailers report fiscal results that include January and the holiday months.
The holiday fourth-quarter results of 4.2% based on government-reported data were similar to our September forecast of 3.8% (Figure 1). Growth in the narrower November-December period was 4.1% on top of weak growth of 2.1% a year ago. Improvement in both measures indicates how the later Thanksgiving in 2019 shifted more sales into December but didn’t severely hurt top-line growth for the combined periods. (Kantar Retail IQ clients can locate monthly and quarterly holiday retail sales data at this link.)
Figure 1. Holiday Q4 Results
As expected, the job market boosted spending. This likely helped shoppers absorb paying a little more for some gifts this holiday. Tariffs put in place early in 2019 likely contributed to fewer deals for holiday shoppers. However, the cancellation of more tariffs planned for mid-December bolstered investor confidence late in the season, alleviating a big concern heading into the holiday.
Even as top-line growth closely matched expectations, some channels underperformed even modest expectations (Figure 2). In aggregate, specialty and department store channels declined at their steepest pace since the 2009 holiday. The drugstore channel lost ground this holiday likely due to Walgreens’ store closures and front-end weakness.
Exceeding expectations was the online and other nonstore channel, which posted its strongest quarterly growth in 19 years. The channel captured 22% of retail sales in the quarter, contributing heavily to an uneven holiday channel performance. Maintaining appeal to holiday shoppers despite online competition were the supermarket and combined supercenter, club, and small-box discounter channels. Omnichannel strategies that attracted in-store and online shoppers and solid growth in consumables likely kept these channels more resilient than others.
Figure 2. US Holiday Q4 Channel Sales
However, what these reported channel results mean for key individual retailers isn’t certain since only a few retailers have reported holiday results (Figure 3). Costco’s reported results indicate it was one of the fastest-growing retailers in the fourth quarter, but it posted slightly slower growth than it did last holiday. Meanwhile, Target — which is likely captured in the discount department store channel — posted modest comparable sales growth relative to very strong growth a year ago. It cited home and hardlines as a drag on growth. JCPenney and Macy’s reported sales declines and subsequently announced a handful of store closures.
Figure 3. Holiday Comparable Sales Growth
Signs suggest that some of these retailers will have tougher sledding in early 2020. Kantar’s spending intentions metric that was surveyed in late December slipped month to month, an indication that after their holiday splurges, some shoppers plan to hibernate in January. Retailers will need to heighten the investments they need to survive in a growing omnichannel world, while limiting their exposure to a potential sales slowdown in the short term.
Look for an update of Kantar’s 2020 retail sales forecast in late February. Our predicted retail themes for 2020 are available in our US retail outlook for 2020+.
For more information, please contact:
Doug Hermanson, Principal Economist