But the party masks grim times for Macy's and other retailers: A new poll of retail CMOs from BDO Seidman predicts that same-store sales will decline 2.7% this holiday season, with total sales falling 2.8%.
And with so many chains lowering their financial estimates and so many more on the ropes, mainstream department stores like Macy's continue to be in the most peril, says Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York.
"This segment is decimated," he says, pointing to struggles at Dillard's, Bon-Ton, Nordstrom, Sears, and JCPenney. "The major issue is discretionary spending. These stores primarily sell apparel and home goods, in an inefficient model, without value pricing. They've been losing market share for more than a decade, and that's not going to change," he says.
But the current economic gloom has made that positioning even more precarious. "The consumer is sitting there with $14 trillion in debt, negative savings, their 401(k)s are turning into 101(k)s, there's something like an $8 trillion negative wealth effect from housing, bankruptcies are up, people can't make their credit card payments, can't pay back student loans, and can't borrow money for cars--and here are these stupid department stores trying to sell merchandise at full price," he says.
Consumers are snubbing them, instead choosing chains that offer strong value, ranging from Costco and BJs to Walmart, Family Dollar Store and Dollar Tree, he says. "And that may not change. If you are in the business of getting discretionary income, the consumer is also decimated. And the standard of living of Americans will never, ever be the same."
Retailers themselves are only slightly less gloomy. The BDO Seidman poll cites an "unprecedented level of pessimism" among retail CMOs. Some 88% expect to offer more discounts and promotions this holiday season, despite the havoc that doing so plays on store balance sheets. "Without a doubt, we can expect a very promotional environment that will appeal to cost-sensitive consumers, despite the impact it may have on shrinking margins," it says in its release.
Most don't expect to see an improvement in their business until at least the third quarter of 2009 or beyond, with 29% citing a turnaround in the third quarter, 17% in the fourth quarter, and 19% in 2010.
And obviously, some chains will benefit from the ongoing shakeout. "You can bet that at Bed, Bath & Beyond--they're quietly dancing in the aisles over the liquidation of Linens 'N Things," Davidowitz says. "And for chains like Macy's, the best thing to do now is be as promotional as possible, reduce the size of certain stores, bring in lower-priced goods that won't hurt image, and really expand private-label business."
Meanwhile, Macy's recently announced that it would resume sharing its same-store sales results, a move it says will "keep shareholders abreast of company's performance as it operates in the volatile economic landscape." The company stopped reporting monthly results earlier this year, because they present a "sometimes misleading" picture of retail performance. In such uncertain times, it says in its release, it wants to be as transparent as possible.