Thursday, December 5, 2013

Black Friday: The Strategy has to Change

We are in the midst of a change in mindset for the Black Friday and Holiday selling period. As we review the transcripts from many of the earnings call this week by retailers such as ARO,FRA,ANF the message is no different--promotions this season will be more aggressive than anticipated. While shopping the malls over Black Friday, we spoke with an unnamed CEO from a leading Missy Specialty Retailer, and asked how can a store be profitable during Black Friday weekend. We mentioned the obvious of extra payroll, opening on Thanksgiving day ,and the promotional cadence which now run at a minimum of 50% off must provide an enormous hurdle to make the weekend profitable. His answer "we offset all the costs by planning and purchasing for this weekend a year in advance!". In a day of fast fashion which each and every retailer claims to be their goal, this strategy runs counter to that logic. Black Friday has little if any organic growth remaining. Those in the know are projecting low single digit growth for the Holiday period. Business tends to go into a lull until next weekend when we start to have less than 10 days until Christmas. Those retailers , particularly in the teen space, who piled in product from years past best selling styles, in our opinion are in great danger of top line and margin pressure.

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