We are just weeks away when retailers report their fourth quarter results. Nordstrom
sales in the nine weeks ended January 1 were down 3.5% and the Rack was down 7.6%. Those figures, terrible as they are, were not a surprise since the week before Christmas the U.S. was covered with ice, and storms were preventing costumers from shopping for gifts.
Nordstrom is not the only company who gave a hint about the severity of the weather and the apathy of customers. Macy’s had news in early January that holiday sales were going to bring fourth quarter result to the lower end of expectation. The National Retail Federation (NRF) also scaled back their optimistic forecast of 6 – 8 % sales increase to 5.3% and even Lululemon found that their results would be below plan. Recent announcements by Saks 5th Avenue, Walmart
and H & M indicate that major retailers cut back on staff. In many cases the tech departments were shrunk.
It does not look good.
Since the holidays many tech companies announced severe cutbacks of employees. Amazon
is cutting back 18,000 associates, Microsoft
more than 10,000, Google
12,000 and others like Meta also announced severe employment cuts. These massive lay-offs are the realistic appraisal by tech leaders that the U.S, consumer has run out of steam – that he is carefully counting his pennies and preparing for a tough Spring. As a result, tech companies are cutting back in order to survive for a brighter tomorrow.
The rate of inflation seems to have eased. Yet, the consumer still looks at high prices of food whether it is in grocery stores or restaurants. Transportation costs and apparel are also much higher than in pre-pandemic years. For many, salaries have not kept pace with inflation and people are scared.
The Federal Reserve’s effort to stem inflation had had some positive effect on reducing inflation and the action they will take in February may confirm that the inflation is coming under control. That will be good news for everyone. However, it will not bring back quick employment to the men and women who were discharged by the tech companies and who are seeking employment at this bitter time.
One hopes that the first half on 2023 will clear up much of the problems that caused inflation and that the fall season will see stronger retail sales and earnings. The weak Christmas season that just passed and described in this blog, certainly leads to optimism for the future for the retail industry.
POSTSCRIPT: The seasonal nature of the retail business makes the holiday season very important. Gifts are exchanged and much hope for the coming year is expressed. Retailers plan for the key selling period of the year and hopefully will mark the coming year as an opportune moment to recapture some sales.