The holiday season is upon us, with the biggest spending period of the year, Black Friday through Cyber Monday, having come and gone. Retailers have positioned themselves all year with their inventory, real estate, and strategic decisions to optimize earnings – with varying results.

Holiday 2022 Recap and Forecast

Compared to 2021, where consumers shopped early due to inventory shortages, early November sales were down. However, for the period from Thanksgiving Day to Cyber Monday (Cyber Week), consumers spent $35.3 billion on online shopping, up 4% year over year. All things considered, analysts are still expecting a record-breaking holiday season.

According to an ICSC holiday survey released last month:
– ICSC forecasts a 6.7 percent increase in October-December sales
– 90% of respondents reported that inflation would affect their holiday spending.
– 71% said they planned to wait for big retail sales moments.
– 65% of respondents plan to spend more time looking for discounts

Big Winners

Walmart, Lululemon, and Ulta Beauty are among the biggest winners of the early holiday shopping period. Each retailer has unique competitive advantages in their relative spaces and took different strategic approaches, but their reactions could serve as a guide for maneuvering through a successful holiday season.

Ulta saw net sales increase 17% to $2.3 billion in their most recent quarterly call, with comp sales up 15% and net income growing 27%. While consumers have been pulling back on discretionary spending, beauty tends to be unscathed, being seen as a habitualized and affordable indulgence. On top of this, Ulta has also taken market share from other sellers, broadened brand offerings, and rolled out new store concepts.

Throughout the year, Lululemon has overachieved expectations in large part due to the demographic the brand caters to, as well as being the market leader in its space: athleisure. From 1992 to 2002, the percent of the workforce that dresses casually went from 7% to over 70%, with legging and athleisure overtaking denim. This form of attire caters to a higher income individual and shows no signs of slowing. The company’s inventory was up 85% year over year at the end of Q2 and Q3, but was a positive growth, as the company previously had too little inventory to meet demand.

Heading into Black Friday, Walmart had a strong third quarter, positioning them to succeed in the peak week. In Q3 they reported an 8.2% increase in comparable stores, resulting in an increased yearly guidance. The retail giant was able to achieve this by increasing market share and by making strategic inventory decisions. In their most recent earnings call, Walmart acknowledged this growth in market share, citing that ¾ of their growth came from households making over $100K. In addition to this, the company made efforts to reduce their inventory, going from being up 25.6% in Q2, to only 12.4% in Q3. A recent survey by Jungle Scout reflects this, citing that 56% of respondents shopped at Walmart for their in-store purchases, 36% for their online holiday purchases, and 32% shopped during Walmart’s Rollback Sale. Notably, Walmart outpaced Amazon this season, receiving the most online searches for Black Friday discounts, which was up 386% from last year.

Despite inflationary pressures, this holiday season is expected to see record breaking revenues with an emphasis on online sales. Winning holiday strategies are focused around many factors, such as personalization, inventory position, retail store footprint and promotional strategies. While some of these are long term, leading retailers are being strategic with their inventory position and promotion strategies to maximize their selling opportunity this holiday season.