Black Friday deals not cutting it? Wait

by Tara Lachapelle

To snag some of this year’s Black Friday deals, a car won’t do you much good — try an ocean liner. Plenty of would-be holiday gifts are still at sea, caught up in a mess of global shipping delays. But shoppers who can’t find what they’re looking for this week may have another savings event to look forward to. Call it Black January.

Retailers including Nike Inc. and Victoria’s Secret & Co. have struggled to get products from factories across the world in time for the most crowded shopping day of the year. Nike said in September that a typical 40-day journey for sneakers had stretched to 80 days, while 45% of Victoria’s Secret’s inventory is still delayed, including a quarter of its pajamas.

Not only that, but wage gains and an almost inexplicable level of consumer demand in the U.S. suggest that this year some companies can get away without heavy discounting. Others began their doorbusters weeks ago, so any 50%-off and buy-one-get-one signs on Thanksgiving weekend will land with less effect.

It’s possible that the combination of later inventory arrivals and restrained promotional activity will leave stores better stocked toward the end of the shopping season. If so, the weeks following Christmas may bring discounts on winter items that retailers still need to move off their shelves. Red-and-green-plaid pajamas, furry boots and puffy coats start to lose their appeal come Jan. 1.

“Anything that is really seasonal that needs to sell before Dec. 25, we’re confident that it will come in time,” Martin Waters, chief executive of Victoria’s Secret, said last week. However, he added, “I do think stores will be more full of inventory in December — mid-December and late December — than the customer is used to seeing.” Depending on when the company receives its orders, “we will need to be flexible with our pricing,” said Tim Johnson, its chief financial officer.

Indeed, it may not be long before anything left over from the holidays winds up in the bargain bin. That means the financial impact of delayed goods may itself be delayed. Investors were nervous heading into third-quarter results that retailers and consumer brands would see profit margins squeezed by the combination of higher freight, labor and raw-materials costs. But companies were able to raise prices enough to cover the impact. The pinch may instead come in the new year, as supply-chain pressures continue while an inventory backlog erodes retailers’ pricing power.

Hasbro Inc., whose Nerf foam-dart guns are expected to be among the top toy gifts this season, said that it’s been able to ensure shelves will be stocked by spending more to expedite its items through the clogged system. But it also has “aggressive advertising plans” to make sure the toys make their way into shopping bags. “It’s very important that the consumer comes and takes away that product,” Deborah Thomas, the toymaker’s chief financial officer, said on its Oct. 26 earnings call.

While Black Friday is known for crowds, more actual purchasing is often done on Super Saturday, the Saturday before Christmas. This means retailers still have time to get delayed products out the door before the post-holiday price slashing. Even so, it’s easy to imagine that stores could remain reasonably full in the new year.

“If you do have content that is on a boat right now that’s going to miss Christmas, what do we do with that?” Jeff Gennette, chief executive of Macy’s Inc., said on a call with analysts last week. “Do we cancel it? Do we hold it? Does the manufacturing partner hold it through a hoteling program?” He said Macy’s wouldn’t take anything Christmas-themed, but that it’s working through what to do about more generic cold-weather products that could perhaps be offered in the first quarter. Victoria’s Secret already had to cancel 10 million units of inventory — almost 5% of what it ordered in August — because it wouldn’t arrive in time.

With the National Retail Federation predicting consumers will buy $28.1 billion worth of gift cards, recipients would be wise to save them for a few weeks. The longer merchandise sits on shelves, the more likely they’ll see a Black January bonanza.

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.