End-of-year retail sales in the U.S. increased 3% with the growth of online shopping this holiday season, according to Mastercard’s latest report. Mark A. Cohen, Director of Retail Studies at Columbia University joins Yahoo Finance Live to analyze the biggest retail winners and losers in this holiday season and discuss prospects for retailers in 2021.
Video transcription
JULIE HYMAN: In late November, the National Retail Federation predicted that holiday sales in November and December would grow by 3.6% to 5.2% compared to 2019. Our next guest says, not so fast. Maybe it’s not that strong. Mark Cohen is Director of Retail Studies at Columbia University. Thank you for being here, Mark. So, what is your forecast for the holiday season in terms of overall growth that we can see?
MARK A. COHEN: I thought 3.5% to 5% was a fantasy. This predicts a normal holiday season, and there is nothing in 2020 that can be described as normal, let alone the holiday season. I would like to point out that the holiday season is not, it does not end on December 25th. It really is the holiday quarter, November, December and January. Mastercard was excited about its view of sales until Christmas Eve, at something like 3% or just slightly less than 3%.
But then I think we will probably see that consumers have closed completely. Returns are reportedly at much higher levels than a year ago. And my feeling is that traffic both online and in brick and mortar will really have stopped after Christmas in the very last month of the quarter in January. So, I’m keeping it at 1% to 2%. And I would find that, frankly, something remarkable, if that is really the case.
BRIAN SOZZI: Mark, I was thinking a little bit about every time we talked this year. And we always seem to be focused on the losers. So, if it’s not broken, why fix it? On your list, you rank Macy’s as a loser this holiday season. What does it mean to lose to a company like this coming out of a holiday season like this? In the beginning of 2021, how many more closed stores will they have? Are you talking about debt patterns? How bad could it get?
MARK A. COHEN: I think losing is failing to reflect what consumers were really looking for this year, which are mainly decorative items, fashion, household items, products and categories that reflect the lifestyle changes that consumers faced last year and will continue to face until 2021. Macy’s didn’t really capitalize on the opportunity to modify its assortments.
His web business, which is not insubstantial, in fact simply reflected whatever was on sale each week, instead of telling an effective story, which is something Target, Walmart, Costco and certainly Amazon have dedicated themselves to. Therefore, losing is not just losing volume, but failing to reflect on the change in the world and the fact that this change is likely to be somewhat lasting.
MYLES UDLAND: And I wanted to take this enduring part, Mark, because I think there are some questions about what the next five years will be like, not just next year, the next five for a Wayfair, an HR, Williams-Sonoma that did well in this type of environment. Do you think that perhaps the retail business has been very excited about the goods experience paradigm in the past decade, and now we are going to see some reversal here? Is it a trend that you are keeping in mind here?
MARK A. COHEN: Well, experiential retail has been on the lips of all analysts for the past few years, as you mentioned. Experiential retail is important, but at the end of the day, it’s always about the product. It’s about the types of things customers are looking for and the way you can pass them on as a retailer. Clearly, the e-commerce business, which has been running at double-digit rates for a few years, has largely accelerated in the crisis. And although that acceleration will necessarily slow down a bit, it will still have consequences.
This puts tremendous pressure on the number of stores, the number of square feet that retailers, especially traditional retailers like Macy’s, support. So I think it will be a tremendous continuous consolidation of real estate portfolios. And, of course, all retailers need to find ways to make their e-commerce businesses more efficient and attractive from an investor’s perspective. It is an expensive business to sustain and, today, few retailers have the resources to understand it.
BRIAN SOZZI: Mark, some viewers may be surprised to hear of this, or to know that Sears and Kmart still have a few hundred locations open. It is not clear who is going there, if any. What is the perspective of this network? Is this the situation with COVID, which finally puts this company down 10 feet at the beginning of next year?
MARK A. COHEN: Well, although they may have some stores that remain open, I think what keeps them from closing completely is that there may still be NOLs available for Eddie Lampert to harvest. At the end of the day, the deal is essentially closed. It’s something I almost didn’t want to mention, because it doesn’t make sense. I just can’t imagine what the future would hold for whatever remains as long as they remain as companies.
JULIE HYMAN: Eddie Lampert. There’s a name I haven’t heard in a while.
MYLES UDLAND: For good reason.
JULIE HYMAN: Mark A. Cohen, thank you so much for giving us your vision today. Director of Retail Studies at Columbia University. Thank you, I really appreciate that.