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What Black Friday Results Spell for Retail

This year’s post-Thanksgiving shopping extravaganza saw solid sales, particularly in stores. Retailers may not be able to shrug off recession concerns just yet though.
This year's Black Friday and Cyber Monday sales were strong.
This year's Black Friday and Cyber Monday sales were strong. (Shutterstock)
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Key insights

  • This year’s Black Friday was especially crucial for retailers hoping to get rid of excess inventory and get a feel for consumer sentiment going into the next year.
  • Online Black Friday sales rose 2.3 percent to $9.1 billion, and Cyber Monday sales rose 5.8 percent to $11.3 billion, according to Adobe Analytics. Millions more consumers that expected shopped over the holiday — and a number of them returned to physical stores.
  • Retailers had to rely on heavy discounting to move product, which is set to continue into the next year.

This year, Black Friday wasn’t just higher stakes for shoppers bargain hunting ahead of the holidays — it was also a pivotal moment for retailers. Many companies are desperate to slim down inventories and hoping to catch a glimpse of what sentiment may look like over the next year. They worried that weak spending last weekend would signal another year of deepening discounts and sluggish growth.

The numbers are in, and they were fine, for the most part. Adobe reported online sales reached $9.1 billion on Black Friday, up 2.3 percent from last year, and $11.3 billion on Cyber Monday, up 5.8 percent. The gains paled in comparison to past years, but retailers have come to expect slow-and-steady growth in e-commerce as the world moves past the pandemic.

Stores saw far more action. The number of consumers who shopped brick-and-mortar rose 17 percent from last year, according to the National Retail Federation. Traffic at Ulta Beauty was up 16.5 percent year-over-year, and up 31 percent compared to 2019, while TJ Maxx saw visits up 2.8 percent from 2019, said Placer.ai.

Still, winter is coming. As much as Black Friday can serve as a bellwether for the next few months, it can also be a trick mirror.

Online sales may have been “record-breaking,” but inventory levels have been too. Inflation probably contributed to higher sales numbers, said Neil Saunders, GlobalData’s retail managing director.

To boost sales, a number of brands had to deepen and lengthen discounts. Online discounts for apparel averaged 18 percent, up from 13 percent in 2021, according to Adobe Analytics. Some retailers started holiday discounting as early as October. In early November, 58 percent of styles were on sale — up from 35 percent last year, and 51 percent in 2019, according to retail intelligence firm Edited.

Analysts worry sales could have just been pulled forward by the early promotions. In its press call on Tuesday, the NRF was optimistic about the coming month: consumers told the trade organisation in a survey they have only made half percent of their planned holiday purchases.

“There’s a difference between attitude and action … There’s certainly a recognition and concern about prices and inflation, and yet people are still out spending,” Matt Shay, NRF president and chief executive, said on the call.

In 2021 there wasn’t enough merchandise. This year, retailers have the opposite problem. Consumers have more to choose from and less to spend — so, they’re being pickier, said Susan Anderson, managing director, Canaccord Genuity.

“Retailers had to put in a lot more effort because consumers were really looking for those bargains,” said GlobalData’s Saunders.

As discounts gnaw away at margins, brands and retailers are still dealing with surging costs and ongoing headwinds — including a potential nationwide rail strike, which Congress said Tuesday it would act quickly to avert.

Retailers’ focus remains on thinning out inventory. Over-indexed companies — among them, Nike, Gap, PVH, Urban Outfitters and Nordstrom — need to move goods, which could mean even more discounting in the coming months that bleed into next year. Cowen offered an ominous prophecy: “the downside of hard marks could arise in January.”

“A lot of people are over-inventoried. They’ve got to get that down, converted to cash … they won’t take anymore [inventory] until they do sell,” said Anderson.

For consumers buy-now pay-later played a role in buoying online sales, according to Adobe. From Nov. 1 to 27, there were 8 percent more orders that deployed buy-now, pay-later schemes, with items per order up 12 percent (though, it’s difficult to say how much of that is attributable to factors like organic growth of the platforms and generational preferences for debit cards). Purchases made through Afterpay, compared to the pre-holiday period, were up 120 percent, said Square.

While the service has helped drive sales for many retailers, it could also be a sign that consumers are beginning to run through the savings they built up during the pandemic.

“That’s kind of scary … it shows that the consumer is starting to get stretched, they’re starting to use more credit,” said Anderson.

Today, consumer confidence plummeted to a four-month low, according to The Confidence Board’s monthly index. There’s a chance consumers could feel a holiday hangover come January, too.

“We might be in for more of a trough as we come into December … There’s a lot of question marks over the state of the consumer, and how healthy the consumer is,” said Saunders. “Those will remain as we move towards the end of the year.”

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