HOLIDAY WARNING: Will tariffs spoil big Black Friday sales?

Key Concepts

• Black Friday: A major shopping event in the United States, marking the beginning of the holiday shopping season.
• Tariffs: Taxes imposed on imported goods, which can affect consumer prices and business operations.
• Consumer Sales: The total revenue generated from the sale of goods and services to individual consumers.
• Mall Foot Traffic: The number of people visiting a shopping mall.
• Department Stores: Large retail establishments that sell a wide variety of goods, often organized into different departments.
• Amazon: A multinational technology company focusing on e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence.
• Costco: A membership-based warehouse club that sells a variety of merchandise, including groceries, electronics, and home goods, often in bulk.
• Walmart: A multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores.
• TJX Companies: A global retailer that operates off-price apparel and home fashion chains, including TJ Maxx, Marshalls, and HomeGoods.

Retail Expert Gerald Storch on the Holiday Shopping Season and Retail Trends

Retail expert Gerald Storch discusses the upcoming Black Friday shopping season, the impact of tariffs on consumer prices, the resurgence of shopping malls, and the success of major retailers like Amazon and Costco.

Black Friday and the Holiday Shopping Season

Gerald Storch emphasizes that retailers are treating the current period as the "Super Bowl season for retail," indicating a highly competitive and aggressive approach to sales and promotions. He predicts that consumer sales will remain strong throughout the holiday season, potentially making it one of the best years in recent memory. Storch states, "Retailers are going to be playing to win. So I don't think it's been any different than any other year. It's going to be tremendous. It may be one of the best years we've had, by the way, in quite a while."

Impact of Tariffs on Consumer Prices

Contrary to concerns that tariffs would significantly impact business and consumer prices, Storch asserts that the effect has been minimal thus far. He notes that as of November 14th, there hasn't been a substantial negative impact. While some prices may have increased, he describes these as being within the "rounding error of normal price." Storch believes that consumers will not be able to discern the exact extent of price increases due to the complexity and variation across different product categories. He confidently states, "Anyone who bets against the American consumer over is pursuing a fool's errand."

The Comeback of Shopping Malls

Contrary to the notion that shopping malls were written off during the pandemic, Storch highlights their solid comeback. He points to a 5% increase in mall foot traffic in October compared to the previous year. Storch credits successful mall operators like Simon for adapting to changing times. He explains that malls have evolved from their traditional "cruciform shape" with a few anchor department stores to more dynamic and engaging spaces. Modern malls now feature "fantastic restaurants, residences, hotels, things to do. They're very exciting and new." This transformation has led to thriving malls even as department stores face challenges.

Challenges Facing Department Stores

Despite the resurgence of malls, major department stores such as Macy's, JCPenney, and Dillard's continue to close stores. Storch attributes this to their inability to adapt to the changing retail landscape and a lack of competitive format. He categorizes department stores as "the good, the bad and the ugly."

• Dillard's: While considered a strong performer, Dillard's is closing a store in Willow Bend, Texas, not due to poor performance, but because the developer is demolishing a section of the mall to incorporate hotels and offices.
• JCPenney: Storch suggests JCPenney would have gone out of business long ago if not for the support of mall operators like Simon.
• Macy's: Macy's is in the middle, showing some improvement but still closing stores. Storch notes that they are shrinking their store base, and the remaining stores are the more profitable ones.

Success of Amazon and Other Retail Giants

Storch reiterates his long-standing admiration for Amazon, calling it one of the best operations he has ever seen. He notes that the interviewer, Stuart, is "late to the party" in discovering Amazon's efficiency and dynamism.

Beyond Amazon, Storch highlights other successful retailers that are capturing market share and thriving in any environment:

• Costco: Storch recommends Costco for those willing to buy in bulk, stating, "you're going to get better deals at Costco if you're willing to go to the store and buy in bulk. It's incredible, in terms of the value will there."
• Walmart: A consistent performer in the retail landscape.
• TJX Companies: This off-price retailer is also noted for its continued success.

Storch concludes that these companies – Costco, Walmart, and TJX – are the "big ones" that are "capturing the share" and "continue to succeed in any environment."

Synthesis/Conclusion

The transcript highlights a robust holiday shopping season driven by strong consumer spending, with retailers poised for aggressive promotions. Tariffs have had a negligible impact on prices, and the American consumer remains resilient. Shopping malls are experiencing a revival through diversification and enhanced experiences, while traditional department stores struggle to adapt. E-commerce giant Amazon continues to be a benchmark for operational excellence, and warehouse clubs like Costco, along with major retailers like Walmart and TJX, are successfully capturing market share by offering value and adapting to consumer demands.