As the holidays approach and consumers begin assessing their budgets to determine who'll make their shopping lists and who might get a card or just coal, retailers must do everything to ensure that their sales are robust.
Many chains must sharpen their competitive edges, attempt to attract new customers and please current ones.
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Not an easy effort — and perhaps especially hard in 2023. On Wednesday the U.S. Census reported that October retail sales shrank for the first time since March, by 0.1%.
Here's a breakdown on exactly where consumers are spending less, compared with the month prior:
- Furniture stores: down 2%
- Motor vehicle and auto shops: down 1%
- Sporting goods stores: down 0.8%
Some areas of the market struck cheerier notes. Consumer spending ticked up in the following divisions:
- Health and personal care stores: up 1%
- Food and beverage shops: up 0.6%
- Electronics stores: up 0.6%
This puts large retailers who cater to all the above divisions in an interesting spot. Where beauty and wellness shop Ulta (ULTA) -) is primed to be optimistic about the coming holiday season, other large chains might not be counting on doorbusters to save their fiscal Q4s.
Home Depot (HD) -), on the other hand, seems poised and ready for good news.
'Worst of inflation is behind us': Home Depot
Home Depot, which saw unprecedented success during the pandemic as folks stayed home and had more time to focus on DIY projects, saw its third-quarter sales slip a bit from the year-earlier period.
In its Q3-earnings report, Home Depot reported sales were down 3.1% year-over-year — but the news is not all bad.
That figure beat Wall Street's estimates of a 3.3% decline, and earnings per share came in at $3.81, higher than the expected $3.76. Digital sales increased 5%.
But Home Depot doesn't see the wobbling figures as a warning sign. Quite the opposite.
"[The] most important observation we've made is that the worst of the inflationary environment is behind us," Chief Financial Officer Richard McPhail said on the earnings call. "And as a result, as Billy said, retail prices are settling in the market." [Billy is Billy Bastek, HD's executive vice president of merchandising.]
"Some prices are settling at levels higher than 2022; others are settling lower. But we're seeing some stabilization there," McPhail added.
HD focusing on Black Friday, gift center events
Home Depot also reiterated that while pricing seems to be stabilizing, the Atlanta retailer intends to ramp up holiday efforts to build and capture enthusiasm for sales and deals in-store.
"As we turn our attention to the fourth quarter, we intend to continue this momentum with our annual holiday Black Friday and gift center events," Bastek said.
Customers are increasingly discerning about deals and where their money goes, so while Home Depot expects a successful holiday season, it isn't getting carried away with overselling the potential impact it might have on the bottom line.
"As it relates to promotional activity whatsoever, we have events in our stores that we love to execute and drive excitement for our customers," Bastek said. "But from a promotional activity standpoint, it's really reverted back to precovid times. ...
"Our pricing has certainly ... settled over the last several months. The environment certainly stabilized, so, you know, we operate ... in a very rational market and promotional environment, as I said, just as a return to kind of prepandemic times."
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