Relax, retailers are fine

When the forecasts landed earlier this fall for the holiday shopping blitz, all signs pointed toward a merry Christmas for retailers. But earlier this month, major chains such as Macy’s Inc., Walmart Inc., Nordstrom Inc. and Williams-Sonoma Inc. saw their shares whacked after publishing third-quarter earnings results.

Was that a signal that something has gone off course?

I don’t think so. The retail industry is still on track for an upbeat holiday season, and the best-run companies will manage to get their share of the spending action.

Macy’s and Walmart, in particular, had solid third-quarter results. Macy’s recorded a robust 3.8 percent increase in transactions, a figure that is a proxy for traffic, over a year earlier. Walmart delivered 3.4 percent U.S. comparable sales growth, and while that was slower than the pace it achieved in the prior quarter, it was still a stronger result than has been typical for the company in recent years. Both retailers’ e-commerce businesses are humming along.

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At Macy’s, investors may have been spooked that its gross margin was unchanged from a year ago, but look under the hood: The company said merchandise margins improved in the quarter, as it did a better job of selling full-priced items. The pressure came from fulfillment costs due to more online orders, and I’d argue that isn’t a bad thing at this point in Macy’s turnaround effort.

It appears Wall Street is just skittish about whether it has rewarded these chains enough already for their progress, or if this is as good as it gets for them. But I saw little in their third-quarter reports that suggests to me they’ve lost a step heading into this crucial time of the year. Plus, U.S. consumers are still out spending in force. We recently got a sunny retail sales report from the Commerce Department. And the majority of shoppers say they plan to spend about as much or more on holiday items than they did last year.

Even little things are lining up Big Retail’s way. The East Coast just got a blast of snow and cold weather, a well-timed prompt for shoppers to open their wallets for coats, hats, scarves and the like. And Thanksgiving falls relatively early in November this year, stretching out the time that people have to load up on Christmas gifts.

It helps, too, that healthy retailers are better-equipped this time around to give shoppers what they want.

I was struck by one of Target Corp.’s holiday TV commercials this year, in which it isn’t so much showcasing merchandise as hyping all the various ways you can get it: same-day delivery, drive-up pickup, and so on. This is a convenience-oriented overture that the retailer couldn’t have made as effectively to shoppers even a year ago, when it hadn’t yet acquired Shipt and it was only testing drive-up services in a tiny fraction of its stores. These are the kind of investments that will help it play defense against Inc.

I still don’t expect the holiday cheer to be evenly spread. J.C. Penney demonstrated with its latest earnings results that it is struggling mightily to stay relevant. Sears Holdings Corp. is fighting this time around for nothing less than its existence, and I’m not expecting that to end well.

But strong retailers should be able to gift themselves healthy holiday sales growth.

Sarah Halzack is a Bloomberg Opinion columnist.