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Retailers’ Holiday Discounts Are Steeper This Year, CFOs Say

Retail finance chiefs are coming into the busiest purchasing season of the 12 months with declining revenue margins as their corporations provide extra reductions to compete for gross sales and filter out extra inventory. 

Profit margins in the sector have shrunk in current months attributable to a mixture of excessive inflation, extra stock and rising expectations from shoppers for worth reductions. Among retailers within the S&P 500 that reported monetary outcomes by Nov. 22, the typical margin on earnings earlier than curiosity and taxes declined to 10.7% within the third quarter from 13.2% within the year-earlier interval, in accordance with S&P Global Market Intelligence. 

Some chief monetary officers within the retail sector say markdowns are needed to start out the brand new 12 months with out the drag of extra inventory on their cabinets. Companies have been caught off guard earlier this 12 months by speedy adjustments in shoppers’ shopping for habits, leaving them with a glut of early-pandemic favorites corresponding to athletic put on and residential items. Other CFOs say their corporations view the promotional setting as a chance to draw extra prospects.

Below is a roundup of retail CFOs’ remarks on this matter throughout current earnings calls. Some responses have been edited or shortened.

Katrina O’Connell, CFO, Gap Inc.

“We’re just prepared to compete when the customer is ready to shop. And so we know we have to get out ahead of ensuring that we’re early enough, that we’re promoting at a time when  [customers are] willing to buy, and we’re not waiting too late to clear the merchandise. And on the flip side, if they’re not going to shop until later, we don’t want to be too far out ahead of it.”

Adrian Mitchell, CFO, Macy’s Inc.

“We will take the required markdowns primarily based on demand versus the expectations we’ve got week-to-week as we progress by the fourth quarter. And we all know that prospects from a pricing standpoint are on the lookout for worth. All the surveys that we’ve seen would point out that the worth goes to be an vital driver for the client.

So as we take into consideration our preliminary ticket, our promotions, our markdowns, we count on to handle by that as finest we will, however the excellent news is we’ve got the pricing science to have the ability to try this.”

Wendy Arlin, CFO, Bath & Body Works Inc.

“We are definitely focused on prioritizing clean inventories. We know that if we end the season clean, it will enable us to start 2023 on a very solid footing. In terms of pricing, as you saw in our remarks, we were more promotional in Q3 year-over-year, and we’re planning to be similarly more promotional in Q4 as we look forward. We saw that the customer is extremely price sensitive right now. And we have made our plans to meet the customer where their mindset is.”

Bath & Body Works plans extra promotions within the fourth quarter due to prospects’ worth sensitivity, the corporate’s finance chief says.


Roberto E. Rosales/Zuma Press

Michael Fiddelke, CFO, Target Corp.

“We’re definitely not operating at a profit level we expect to over time. And the one-time impacts we’ve seen this year from the volatility and the change in trend has led us to more markdowns and salvage action on inventory than we’ve seen historically by a wide margin. And so we would expect to get a lot of that margin and that improved markdown performance back.”

Andrew Page, CFO, Foot Locker Inc.

“Note that while the promotional environment has continued to intensify, we are receiving more support from our vendors to help fund markdown dollars. Historically, we’ve managed a collection of four basic inventory levers: cancellations, [return-to-vendors], push outs and vendor allowances, or VAs. We’ve worked closely with all of our brand partners to balance all of these levers. Each brand partner utilizes all of them. But this year, based on heavier overall inventory levels, VAs are higher than usual.”

Jill Timm, CFO, Kohl’s Corp.

“In terms of the promotional intensity, I definitely think it’s going to be widespread. I don’t know if there’s any particular category that’s going to have more promotional intensity than others. I just want you to know that that is a core fundamental of who Kohl’s is, and we’re prepared to compete this holiday.”

Jeff Howie, CFO, Williams-Sonoma Inc.

“Our approach has been very consistent in terms of the level of promotions that we’ve been doing. And plus, I want to reiterate that we remain committed to not offering site-wide promotions in our brands, and we will do whatever it takes to continue to not do that. We think that our in-house design proprietary product really resonates with the customer because of its differentiation and commands its own pricing power, and we’re seeing that in our results.”

Scott Goldenberg, CFO, TJX Cos.

“Talking about just the markdowns this year, we keep talking about our markdowns rate has been better all year than our fiscal ’20 levels, although our markdowns have been slightly higher than what we had anticipated. But they’ve been built into each forecast that we give you and have largely been exactly where we thought they would end up….A lot of our inventory pickup has been due to getting inventories a bit earlier than we expected as the supply chain improved.”

Write to Kristin Broughton at

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