Inflation, Beauty, E-Commerce, Exec Moves And More: A Look At February’s Big Retail News

Is the retail industry’s rebound living on borrowed time? It’s a cryptic question, but some business intelligence analysts are answering it affirmatively as the inflation rate in the United States hit its highest point in decades at the start of the year. Select forecasts suggest it could return to pre-pandemic levels by the end of 2022, but they’re optimistic. As long as demand outweighs supply, purchasing behavior will likely shift as customers feel the sting of rising prices, and retailers may start to feel the squeeze, if they haven’t already. Add on the yet unknown effects of the Russian invasion of Ukraine on international supply chains, and the picture appears even bleaker.

In February, however, mass-market sales have continued to accelerate while national drugstores chains readied for restructuring, and department stores asserted themselves over investors. Below, we summarize recent retail news.

RISING INFLATION POWERS U.S. RETAIL SALES IN JANUARY

The U.S. Commerce Department’s Census Bureau released a seemingly rosy advance retail spending report for January, which measures spending at stores and restaurants, but there’s murkiness between the lines. According to the report, retail sales rose by a seasonally adjusted rate of 3.8% from December last year to January this year, marking the strongest monthly gain in almost a year. E-commerce sales climbed as well as spending on automobiles, home goods and building materials. Restaurants and bars saw decreases due to the spread of the Omicron variant in January.

The report doesn’t account for the hike in inflation rates, a phenomenon economists and consultants assert is responsible for much of the increase in spending. In other words, consumers may not be buying more per se, just paying more for their purchases thanks to supply chain disruptions and surging supplier costs.

The impact of inflation is clearer with a look at year-over-year data. U.S. retail sales in January increased 6.4% as opposed to 13% during the same period in 2021. E-commerce sales dropped year-over-year considerably from a whopping 26% in January 2021 to 4.1% early this year. A return to stores is undoubtedly a contributing factor. In fact, an estimated one-third of the spending in 2021 can be attributed to inflation alone.

WALMART AND TARGET INVEST IN BEAUTY

As the nation’s largest retailer by revenue, Walmart is faring well in the face of intense inflationary pressure. Despite record supply chain costs—over $400 million more than anticipated—the mass-market chain reported strong fourth quarter and fiscal year 2022 sales, a period encompassing the holiday season. Beauty products were a top-performing consumables. Beauty’s fortitude is perhaps no surprise after moves made in 2021, when Walmart beauty offering expanded and evolved its beauty selection with direct-to-consumer, indie, and multicultural brands to distinguish it from Target’s and Amazon’s beauty repertoires.

Now, following competitor Target’s Takeoff program by a few years, Walmart has announced it’s introducing a beauty accelerator program. Walmart Start will pluck five emerging beauty brands from obscurity and groom them for mass-market launches in up to 3,500 doors. Winners of the program will be revealed in May.

Speaking of Target, its beauty assortment is gaining 40 new brand partners with a focus on Black-owned beauty and clean beauty brands. GlowRx, Thread, Frederick Benjamin, Trademark Beauty and Undefined Beauty are among the beauty brands that have broken into Target this year.

THE BEAUTY RETAIL RACE FOR NEWNESS

Indie beauty is a major battleground as retailers aim to nab beauty market share. Over the past two years, the biggest retailers have been busy onboarding the hottest budding beauty brands at a brisk pace. Beauty Independent covered retailers’ beauty strategies, including how Ulta Beauty, Sephora, Target, and Walmart have swelled their beauty assortments, and the implications of large-scale retail partnerships for smaller indie brands.

CVS BEEFS UP DIGITAL IN A BIG WAY

CVS is reducing its physical footprint as it prepares to make a $3 billion investment in its improving digital capabilities, according to the drugstore retailer’s fourth quarter 2021 earnings call. Nine hundred brick-and-mortar stores are slated to close, an amount that equals about 10% of CVS’s store fleet, in the next three years. The closures come after e-commerce and digital channels experienced sharp increases in demand in 2021.

The shift to digital is part of a broader omnichannel strategy that will see CVS Health, much like its competitors Walmart and Walgreens, push further into the healthcare space. The retailers are challenging each other to provide the most integrated and accessible primary care services.

RETAIL EXECUTIVES ARE MAKING MOVES

There was a slew of executive appointments and departures in February:

• ULTA: Former Sam’s Club EVP and COO Gisel Ruiz joined Ulta’s board of directors.
• WALMART: Musab Balbale departed Walmart, where he was VP and GM of beauty, for CVS Health, where he will serve as SVP and chief merchant. Creighton Kiper, former merchandising VP of wellness at Walmart, has assumed Balbale’s role.
• SEPHORA: Marc Abergel was appointed to the newly created position of global chief digital officer at Sephora. He previously held positions at Deloitte and Apple.
• GROVE COLLABORATIVE: Former Burt’s Bees and Seventh Generation CEO John Replogle was appointed chair of Grove Collaborative’s board of directors.
• COSTCO: Former EVP and COO of merchandising Ron Vachris was appointed president and COO of Costco in an internal promotion.
• CREDO: Former GM and president for the Americas at Aesop Stuart Millar was appointed to CEO of Credo Beauty.

DEPARTMENT STORES PUT THEIR FEET DOWN AND TRY NEW THINGS

Department stores have been feeling the weight of activist investors of late, but Kohl’s and Macy’s aren’t rolling over, at least not yet. In January, Kohl’s received two takeover bids after minority stakeholder Macellum Advisors urged the chain to make significant management changes or seek a buyer. Both bids have since been rejected, with board members stating that they undervalue the company.

To stave off a possible hostile takeover, the department store chain adopted a shareholder rights plan, otherwise known as a “poison pill,” that will be in effect for the next year. Macellum’s response was nothing short of furious. The firm accused Kohl’s of “anti-shareholder maneuvers,” including a possible visit to Amazon headquarters in Seattle. Kohl’s stock price has steadily decreased since news of it rejecting the bid.

While the heat turns up between Kohl’s and its investors, the retailer is aggressively scaling its shop-in-shop partnership with Sephora. An additional 400 locations are set to open this year, placing Kohl’s’ target of 850 Sephora at Kohl’s locations firmly in sight by the end of 2023. Six more prestige brands have been brought into the assortment, including Murad, Jack Black and Living Proof.

Macy’s is attempting to put a possible e-commerce spinoff to rest, simply stating it prefers to stay integrated and is in a good enough financial position to do so. The decision responds to pressure from activist investment firm Jana Partners in October 2021 to capitalize on the chain’s fast-growing digital business by splitting it from its brick-and-mortar business, a strategy attractive to investors lately.

For Macy’s fourth quarter, its same-store sales were up 28.3% and digital sales were up 12%. Digital sales skyrocketed 36% over 2019, an important benchmark since 2019 was prior to the pandemic. The department store chain plans to concentrate efforts on building its digital store in the lead-up to its third-party marketplace scheduled to debut later this year.

Nordstrom is getting into podcasting. which may be a first for an American department store. United Kingdom-based Selfridges is in the second season of its sustainability podcast, and Trader Joe’s has a popular podcast titled “Inside Trader Joe’s.” The Nordy Pod launched in late January with chief brand officer Pete Nordstrom at the helm.

Marketed as an intimate storytelling platform that will give shoppers a behind-the-scenes peek at the company, the Nordstrom podcast will delve into topical discussions about the Nordstrom business and the fashion industry. It even promises to feature candid conversations with long-standing customers. Recent guests include Alex Mill CEO Mickey Drexler, best known for being the chair and CEO of J.Crew Group, and family members Erik and Jamie Nordstrom, who are CEO and president of stores at Nordstrom, respectively.

COOL INDIE E-TAILERS OF NOTE

It can be challenging to keep track of all the new e-tailers that pop up, but two recently caught the eye of Beauty Independent editors last month.

Before department stores and huge specialty retailers started merchandising sexual health products alongside skincare, bath and body care, apparel and wellness, The Lake was doing it, and its husband-and-wife founder team are out to shake up common perceptions of pleasure.

Dermatologist Lily Talakoub’s Derm To Door started as an e-commerce platform for skincare usually offered at physicians’ offices, but now it’s on track to become a telehealth hub connecting board-certified dermatologists with patients nationwide.

ADDITIONAL NEWS

Influencer Sommer Ray’s Imarais Beauty Enters J.C. Penney As The First Ingestible Brand In Its New Beauty Assortment [Beauty Independent]

World of Chris Collins Becomes The First Black-Owned Fragrance Brand At Sephora [Beauty Independent]

At Flannels, Crafting Regional Retail Strategies To Drive Growth [Business of Fashion]

Beauty Avenue Opening Indie Beauty Concept Stores At The World-Famous Las Vegas Strip [Retail Dive]

Walmart Kicks Off Exclusive Sales To Try To Win And Retain Walmart+ Members [CNBC]