The Holidays Could Make or Break Struggling Stores
NEW YORK (AP) — Clothing stores and specialty retailers are offering big discounts and heavily promoting curbside pickup in hopes of rescuing a lackluster holiday shopping season in which surging coronavirus cases have kept many shoppers at home.
For some, it could be their last chance at survival. And even a last-minute sales boost could be too late to save them.
The holiday season, which accounts for about 20% of the retail industry’s annual sales, has always been make-or-break for struggling stores. But it’s even more important this year as they look to make up for sales lost since the pandemic forced them to temporarily close locations.
That’s a big challenge given that the deadline to order online and get items in time for Christmas has passed. Retailers also can’t rely on big crowds of procrastinators because of restrictions on how many people can shop at once.
Big box retailers like Walmart and Target, which have been deemed essential and mostly allowed to remain open throughout the pandemic, have done well by attracting shoppers with safety concerns who don’t want to go to multiple stores. Supermarkets, home improvement stores and online retailers have also seen strong sales.
But many clothing and department stores have struggled, especially those in shopping malls, some of which were already in trouble even before the coronavirus upended the retail landscape.
“People are spending money. It’s just falling in pockets of areas like home improvement and food,” said Ken Perkins of RetailMetrics LLC, a retail research firm. “You have to worry about the mall-based retailer. When the dust settles after the fourth quarter, you’ve got to wonder what kind of position some of these chains are going to to be in.”
Perkins expects fourth-quarter earnings for the roughly 100 chains he monitors to be down 2.1%, with mall-based retailers down nearly 30% and stores located outside of malls up 3.4%. A recent report from S&P Global highlighted seven publicly traded mall landlords who are facing a brutal winter.
Already, more than 40 U.S. retailers have filed for Chapter 11 since the pandemic started forcing shutdowns in March. And more than 8,600 stores have closed this year, according to Coresight Research. Just in the last month, music chain Guitar Center Inc. and clothier Francesca’s Holdings Corp. filed for Chapter 11 bankruptcy. Meanwhile, retailers like Neiman Marcus and J.C. Penney that emerged from bankruptcy this past fall are looking to regain their footing.
Neiman Marcus is among the companies heavily promoting curbside pickup in the final days before Christmas. The luxury department store chain is offering customers a $25 gift card if they use the service.
The worst could still be ahead, with COVID-19 cases on the rise in the U.S. and the possibility of more store closures and restrictions in 2021.
“Without this extra boost that they normally get, we are going to see an uptick in bankruptcies and store closures in the first quarter,” said Natalie Kotlyar, a national leader of BDO’s Retail & Consumer Products practice. “I think many retailers were holding out filing bankruptcy to see how the holiday season is going to go.”
Retail sales fell a seasonally adjusted 1.1% in November, according to the U.S. Commerce Department. It was the biggest drop in seven months, with many types of retailers seeing declines. The biggest drop was at department stores, down 7.7%.
There’s also other evidence of growing consumer caution: Overall spending from roughly Oct. 30 through Dec. 14 is down 5.4%, from the equivalent period last year, according to JPMorgan Chase, which tracks activity on 30 million of its debit and credit cards.
Still, the National Retail Federation, the nation’s largest retail trade group, expects holiday sales to increase between 3.6 percent and 5.2 percent compared to 2019, mostly due to strong sales at the big box stores. Those numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with last year’s gain of 4%.
The holiday season is also the time when stores typically get a chance to attract new customers. Nearly 90% of customers polled by America’s Research Group in recent years said that when they shop at a new store for the first time, it’s during the holidays. That’s not happening this year. Shoppers are cutting back the number of stores they visit to four or five, from six to eight, says C. Britt Beemer, chairman of the group.
Liana Pai, who co-owns clothing store Liana in Manhattan, says her family business used to be bustling with customers during the holiday season. But with restrictions and people nervous about shopping, she has just a few people coming in per day. After being forced to close in the spring, Liana reopened in July, but she’s only recaptured about one third of her typical sales. She’s been on the verge of closing her business three times
“It’s definitely been rough, “said Pai, who has been stepping up FaceTime with her customers , marketing her shop on Instagram and offering fat discounts during the final days of the season. She noted that she needed to do well during the holidays because it helps her get through the slow period of January through March.
“We’re scraping by,” she said.
Others have managed a successful transition to online sales. Camp, a small chain that designed its toy shops to be places kids wanted to play, had to temporarily close all five of its locations in the spring. It regrouped, shifting activities like birthday parties online and launching a holiday gift exchange 10 days ago.
Online sales increased 40% compared with last year and overall sales have tripled. Since stores reopened, traffic has increased an average of 17% each week. Tiffany Markofsky, Camp’s chief marketing officer, says an outdoor location outside of a Manhattan store and ticketed shopping times have helped shoppers feel comfortable.
“We are in a much better place than last year,” said Markofsky, noting a strong holiday season. “A lot of this stuff we were thinking about in our minds. But COVID crystalized it.”
By AP reporter Anne D’Innocenzio