Department stores have been pretty candid about the low expectations they have for 2020. With feeble demand and a surge in virus cases across the country, its somewhat surprising to see that many of these retailers exceeded their own expectations for the quarter. Macy’s sales dipped by 23%, Kohl’s by 13%, Nordstrom by 16% and TJX by just 3% compared to last year.
Three key elements contributed to these results:
- Digital continues to flourish as shoppers gravitate to ship to home and pickup instead of in-store browsing. Macy’s digital sales grew by 27% and drove 38% of the business; Kohl’s digital business grew 25% supplying 32% of total sales (40% of which were fulfilled by stores).
- Early holiday traffic also provided a significant boost as shoppers got ahead of holiday shopping needs, fearing additional lockdowns and virus resurgence as the year goes on. For Nordstrom, this trend aligned with the later timing of their Anniversary Sale event, helping them reach just a 7% decline in full-price sales for the quarter.
- Home categories were also a standout across most retailers, as shoppers invest in life at home. TJX’s Homegoods business managed to grow sales a whopping 18% during the quarter, despite having no ecommerce presence—a fact that will be changing in early 2021 with the launch of a transactional homegoods.com.
What can Black Friday and Cyber Monday tell us about Q4?
Online sales skyrocketed on Black Friday while store traffic remained muted and Cyber Monday was the biggest online sales day in US history. This tells a tale in line with what department stores have been seeing all year as shoppers eschew traditional in-store shopping and purchasing en masse. A “strong” Q3 coupled with these Black Friday and Cyber Monday results could indicate more evidence of an earlier, online shift in sales rather than a rebound in overall performance for these retailers.
The bottom line
While exceeding quarterly expectations is a boost for any retailer, we expect apparel and department stores to have a longer road to any semblance of recovery. The holidays won’t be quite as jolly this year as many look to just put the issues of 2020 behind them as quickly as possible and start fresh in 2021 where the promise of a vaccine gives hope of some kind of return to normal. The bigger challenge for apparel and department store retailers will be figuring out what normal looks like to their shoppers: shoppers will return to stores, but how many and how often? How much of the boom in online shopping behavior will stick? And more importantly, will shoppers still want to buy what these retailers sell? Unfortunately, only time will tell.