What Retail Investors Should Be Watching in December

Markets Motley Fool

Executives at retailers including Kohl's (NYSE: KSS) and Macy's (NYSE: M) have gone on record recently, stating that sales trends were strong throughout November, including the key Black Friday shopping event. But last year, Kohl's got off to a strong start on Black Friday weekend only to post a 2.1% comparable sales decline for the combined November to December period.

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In this episode of Industry Focus: Consumer Goods, the team discusses what lies ahead in December. It's critical for retailers to keep attracting consumers to their stores during the first half of December. Both internal factors (like offering compelling promotions) and external factors (such as the weather) could be important in this regard.

A full transcript follows the video.

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This video was recorded on Nov. 28, 2017.

Vincent Shen: If we follow the new timeline with the holiday shopping season, so essentially stretching from Nov. 1 through the end of the year, we're about four weeks now into the period with five weeks or so to go, what do you think Fools should be following and watching in the final stretch of 2017?

Adam Levine-Weinberg: I would say that the first half of the holiday shopping season has been really great for retailers, but that's not a guarantee that by the end of the shopping season, it's going to still be really great. So what we've seen, last year, for instance, Kohl's mentioned that they did really well over the Black Friday weekend, really well in the week leading up to Christmas, but that in-between period in the first three weeks or so of December, they had a big sales decline year over year. So they had a limited shopping season with very peaky demand during the biggest shopping periods of this one-month period. So as a result, they ended up with a 2% comp sales decline. So what we want to be looking for is, can retailers find ways to maintain the momentum and keep people coming back into their stores during the first weekend of December, the second weekend of December, the third weekend of December? Because we know that when we get out to the last few days before Christmas, there's going to be a surge. But it's really maintaining the momentum in between.

Shen: Yeah, and I think a lot of that is going to be driven by how these companies approach some of those online digital initiatives, some of the things that will bring people in store, like shop online pickup in-store, things like that will help maintain traffic during the lulls and away from those two periods that you mentioned.

Levine-Weinberg: Another thing that you're seeing is offers that expire where you have to come in sometime in the early to middle of December. So people who shopped at Kohl's this past weekend may have been able to earn Kohl's Cash, which they can use, but they're going to have to use it in the first half of December. So that may be able to drive repeat traffic. Similarly, you're seeing Macy's offering Macy's Money for certain purchases. If you buy something online and agree to have it shipped later, then you can get this Macy's Money that you can use in store. So there's a variety of ways that they can try to shape consumer behavior, but whether those are actually successful, we still have to see.

Another big question is whether the favorability of the holiday calendar will help. Some years, there's four Saturdays between Thanksgiving and Christmas, and some years there are five. Historically, when there have been five Saturdays, which includes this year, that's been very good for retailers, because Saturday is the biggest shopping day of the week. Again, this depends on how big of a lull there is in between this past weekend and the week leading up to Christmas. Another big question is how big the Super Saturday will be. Saturday, Dec. 23 is the last Saturday before Christmas, that's historically a really big shopping day, even bigger than Black Friday. It's particularly good for the physical retailers this year, because for the most part, there aren't going to be deliveries on Dec. 24, because it's both a Sunday and Christmas Eve. So if you're missing something and you need to get a gift, that day is really going to be your last day to go get it, and you're going to have to buy it in a store from something that I have right there. So that's potentially a really big sales driver and could allow some of these retailers to close the holiday shopping season with quite a bit of momentum.

So I say those are the main things. The last thing I would add is weather. If the weather cooperates and it stays cold but not really snowy, that would be great. However, if you have a big snowstorm that gets lots of people stuck inside over one of these big shopping weekends, that's obviously going to help out somebody like Amazon.com, because people are going to want to order from their homes rather than going out to the stores.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levine-Weinberg owns shares of Kohl's and Macy's. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.