Are Halloween Results The Canary In The Coal Mine For US Holiday Sales?
As those who know me are aware, my last job as a CIO was for a party supply retailer, a once-competitor, now-part of Party City. There are no words to describe the feeding frenzy that was the week before Halloween in stores. Not one. If you haven’t lived it, you just can’t visualize it.
So, imagine my surprise when I saw an ad on TV offering 20% off all holiday costumes at Party City a week before Halloween. I expressed this to a friend, who had also been in the biz back in the day and she said “Oh, times have changed… there are always promotions.” But it didn’t sit right with me. Nor did the lack of crowds at a local Party City store (which I only noticed when I was going to dinner nearby). The “recovery” process, which is the putting of items back on peg hooks and putting costume pieces back together again, also seemed either incredibly efficient, or…not needed. At 8 PM on a Friday, the store was neat as a pin.
The holiday came and went, and November 7, the shoe dropped. Sales overall were down by 2.6% in stores, below the expected .5% drop, and while the company seemed to blame a lot of the problems on a very long-term helium shortage, in fact, MarketWatch reported the following:
But it’s not just about helium, which the company continues to see as a temporary problem. Halloween product sales, for the quarter and the month of October combined, were 3.2% lower than last year; same-store sales for October alone fell 4.9%.
Same-store sales for the 256 temporary Halloween City stores, which was up from 239 stores last year, tumbled 20.8%...
Now, the company blamed the store sales shortfall on costume sales moving online, but experience tells me the problem was much bigger than that.
Anecdotal photos and reports from around the country told the tale that retailers gave up on Halloween early. Halloween decorations were replaced by Christmas décor by mid-October, and all-things-Christmas were out on the selling floor far earlier than usual. This in stores ranging from Home Depot to Walmart.
Let me say it again: Retailers gave up on Halloween early this year and moved on to an early start to Christmas merchandise. This is not normal.
One week after Halloween, we are now full bore into the retail holiday season. Thanksgiving is great for grocers, and pretty much a non-event for everyone else. Ready-made excuses are already in the pipeline for a tough season in general retail. A very late Thanksgiving day makes the “official” season a week shorter than usual. Prime Day likely saw consumers pre-buying holiday gifts. The weather has been weird all over, and fires in California are not helpful. That’s all true, but I think we’ve got a problem.
Not to put too fine a point on it, but even market darling Amazon had a tough quarter. The profit shrinkage was blamed on next day delivery investments, but unless the company puts those costs into Cost of Goods Sold (I suppose anything is possible), the financial statements just tell the tale of shrinking gross margin.
The US economy is very consumer-driven, and until now, with almost full employment, it has seemed to be floating along on a cloud. The stock market is up, what could be bad? Well, what’s bad is continued wage stagnation, ridiculous political instability, fires, unusually warm weather in the south and a blossoming national debt. Oh yeah, and tariffs have caused price increases across many categories, with more to follow.
The National Retail Federation continues to predict solid sales increases over the holiday season. Despite the “shortened” holiday season (as if we could escape it today!), it believes we’ll see a 3+% rise overall. I hope they’re right. But with Black Friday sales apparently starting now for some very big ticket items I’m thinking retailers are concerned already. I’ve got my eye on a new fridge, and Home Depot is selling it for $1,000 off list. Mattress prices are really down. We just bought a new one for about 2/3 what I expected to pay.
In other words, retailers seem to be buying their holiday sales early.
I hope I’m wrong, and shoppers come out for a bang-up holiday season. But you know, I knew Halloween was not going to be good. After a lifetime in this industry, I can smell it from a distance. I’m not feeling great about the season to come. I think we’ve just seen the canary in the coal mine.
What do you think?