Retail News Report: Kohl’s CEO Steps Down, Amazon Grapples With Losses, And NRF Forecasts “Healthy” Holiday Sales

With inflation remaining unflinchingly high and domestic job growth in the United States showing signs of contraction, Americans are contending with serious stressors that don’t have anything to do with in-laws as they head into the end of the year. If Amazon’s Prime Day event in October is any indication, however, they may still shell out for gifts this year, albeit a bit more cautiously than they’ve done in less constrained years. Below, we take stock of the macro conditions they’re facing as we summarize recent retail news. 

COST OF LIVING STIFLES RETAIL SPENDING

American households grappled with towering food and rent costs in September. The cost of groceries was up by 13.5% year-over-year and shelter costs spiked more than they have in over 20 years. Dinged by consumers spending elsewhere, retail sales growth remained flat month-over-month, according to the U.S. Census Bureau. Dow Jones estimated retail sales inched upward .3% for the month. They rose by .4% in August.

General merchandise stores were the biggest gainers in October, registering a .7% increase in sales. Online retailers saw a .5% jump after a slight decline in August, while bars and restaurants, clothing stores and health and personal care stores also experienced bumps.

The Census Bureau’s category of “miscellaneous store retailers” saw sales dip 2.5% during September. Sporting goods, books, music, furniture and home stores, electronics and appliances, and car dealerships recorded monthly losses as well. Gas station sales dropped 1.4% on energy price declines that have been happening since mid-summer. 

The gap between wage growth and spending has widened. The average American’s income was flat in October after factoring in consumer price increases. It rose .2% in August. Job growth slowed in September, with just over 250,000 new jobs added to the labor market. August saw an increase of 315,000 jobs. The average monthly gain during the first half of the year was over 400,000.

The national unemployment rate slipped to 3.5% last month after rising to 3.7% in August. The number of workers in the labor force fell month-over-month, affecting the unemployment rate calculation. The hospitality and healthcare industries had the strongest hiring numbers. The retail, warehousing and transportation industries slashed jobs.

KOHL’S CEO IS OUT

On Tuesday, Michelle Gass announced she will be stepping down as Kohl’s CEO early next month. Tom Kingsbury, a Kohl’s director, will become interim CEO following her exit. Gass will become CEO of Levi Strauss & Co. Her departure from Kohl’s wasn’t surprising given the challenges the department store retailer has dealt with recently. 

Despite an expanding shop-in-shop partnership with Sephora, Kohl’s has had three consecutive quarters of slumping sales, and it’s battled with investors over future management. In January, it adopted a shareholder rights plan or “poison pill” to protect itself against a hostile takeover. Over the summer, it walked away from a takeover bid by The Vitamin Shoppe owner Franchise Group, a decision that angered activist investors like hedge fund Ancora Holdings Group. Ancora holds a 2.5% stake in the company.

In September, Ancora sent a letter to the Kohl’s board urging them to push Gass and chair Peter Boneparth out and seek new leadership. At the time, the board backed both executives, but Gass’s departure shows Kohl’s moving in the direction desired by Ancora. 

As it announced Gass would be leaving, Kohl’s released preliminary third quarter results warning investors that comparable store sales decreased 6.9% in the three-month period ended Oct. 29. Net sales were down 7.2% from last year.

NATIONAL RETAIL FEDERATION RELEASES HOLIDAY FORECAST

The holiday spending predictions keep rolling in. The National Retail Federation (NRF) released its 2022 holiday forecast expecting sales to be “healthy,” but not match 2021’s blockbuster results. Specifically, it anticipates 2022 retail sales to advance 6% and 8% to reach $942.6 billion to $960.4 billion during November and December.

By comparison, 2021 holiday sales gained 13.5% year-over-year to reach a total of $889.3 billion. They were spurred by the resurgence of the brick-and-mortar channel following months of pandemic-related closures in 2020. The forecast for holiday sales this year comes in above the average annual holiday sales growth rate of the past decade, which clocks in at 4.9%.

Online and other non-store sales are expected to beat last year’s numbers, rising between 10% and 12% to hit a total of $262.8 billion to $267.6 billion. Online purchasing racked up $238.9 billion in sales in 2021.

EARLY HOLIDAY SHOPPING IS A MIXED BAG 

Following two quarters of relatively slow growth and compromised profits at Target, the mass-market chain’s October Deals Day event gave it an early holiday shopping win. According to a report from consumer traffic insights firm Placer.ai, Target’s weekly foot traffic saw a 3.2% year-over-year jump during the first week of October thanks to the event. 

Launched in 2018 to rival Amazon’s Prime Day, Target’s most recent Deals Day occurred from Oct. 6 to 8. It led to nearly 28% more in average daily visits to Target stores than in 2021, with about 57% more daily visitors per store than in 2020. 

Following a Prime Day in July that was the biggest sales event in Amazon’s history, its October Prime Early Access Sale was a modest event. Prime customers bagged less than half the amount of discounted products they did during July’s Prime Day event—100 million items versus 300 million items—and the average order size shrank 23% from July’s event to October, according to the market research company Numerator.

International bestselling categories during October’s Prime Early Access Sale included apparel, home, toys and Amazon devices. Bestselling items in the U.S. included Laneige Lip Sleeping Mask, Apple AirPods, Vital Proteins Collagen Peptides and Crest 3D Whitestrips Professional Effects Teeth Whitening Strips. Amazon held two Prime Day-style events for the first time this year as the company looked to offset two consecutive quarters of declining online sales and operating income.

AMAZON PROFITS ARE STILL SHRINKING

Amazon’s e-commerce sales growth increased in the third quarter by 7%. They were up 4.3% in the second quarter. On a dimmer note, its profits continued to shrink as both operating and net income tumbled. Operating income for the third quarter clocked in at $2.5 billion compared to $4.9 billion in the year-ago period. Net income was down to $2.9 billion from $3.2 billion last year.

Despite the bottom-line stumble, revenues from the e-commerce giant’s marketplace seller, advertising and Prime subscription services grew during the quarter. Its advertising sales surged 42% from the second to third quarters, with seller revenues spiking nearly 100%. The spike was likely due to increased activity and sales from the Prime Day event. Overall, net sales increased 15% to $127.1 billion in the third quarter from the same period last year. 

Glancing ahead, Amazon’s fourth quarter could be a bumpy one. Executives are warning profits could vanish as the company faces headwinds from foreign exchange rates. Operating income is forecast to land between $0 and $4 billion. In the fourth quarter of 2021, it was $3.5 billion. Net sales for the fourth quarter this year are expected to grow between 2% and 8% to reach $140 billion to $148 billion.

FASHION E-TAILERS EXPAND TO BEAUTY

Amazon-owned fashion e-tailer Shopbop debuted its beauty assortment in October, offering a selection of established and emerging brands across skincare, makeup, haircare, beauty tools, and bath and body care. The new category, which features the brands Costa Brazil, Stila, Buxom, Uoma Beauty, Wander Beauty, Ogee and BeautyStat Cosmetics, is fully integrated into Shopbop’s core fashion and accessories business, owned digital properties and social media accounts as well as marketing campaigns. Shopbop beauty brands are able to opt in or out of selling on Amazon via Shopbop’s storefront, The Shop By Shopbop.

With a loyal customer base and a website that racks up over 10 million visits per month, Shopbop is the latest fashion e-tailer to expand its business to beauty. Earlier this year, Farfetch launched a beauty marketplace after acquiring the upscale beauty specialty retailer Violet Grey. Moda Operandi will debut its first beauty offering in early 2023. 

CLEAN BEAUTY RETAIL CONSOLIDATES 

After a tough few years that saw it scale back its physical footprint and pivot its business model to its in-house brand, Follain, a pioneering clean beauty retailer, was acquired by Credo Beauty in October for an undisclosed price. The acquisition is NextWorld Evergreen-owned Credo’s first. 

Follain’s flagship brick-and-mortar store in Boston, the last one standing from a former fleet of six, will soon become a Credo store. It will represent Credo’s second location in the city. Follain’s site now redirectors visitors to Credo, and its branded skincare line is joining Credo’s private-label portfolio.

Credo picks up Follain as the retailer is set to reignite its physical expansion plans. For three years, it’s had no store openings. Credo’s 11th location will bow in the Los Angeles neighborhood Larchmont Village early next year, and there are additional locations on the horizon. 

After a pandemic-related slowdown, Credo’s brick-and-mortar business is on the rise again. Store traffic is up by double-digit percentages monthly this year. Generally, its business, including stores, private-label brands and a curated selection of products at Ulta Beauty, has increased by double-digit percentages this year as well. 

ADDITIONAL NEWS

• Facial Bar Concept Clean Your Dirty Face Expands [Beauty Independent]
• Ulta Beauty’s Sparked Program Takes Center Stage [Beauty Independent]
• Jalisia Collective Wants To Make Shopping For Luxury Niche Fragrances Easier [Beauty Independent]
• Modern Sexual Wellness Brands Embrace The Adult Channel [Beauty Independent]