As the busiest shopping season of the year gets underway, retail CFOs are facing shrinking profit margins as their companies offer more markdowns to drive sales.
Among retailers who reported third-quarter earnings through November 22, the average margin on earnings before interest and taxes fell to 10.7% from 13.2% in the third quarter of 2021, The Wall Street Journal reported Wednesday (Nov. 23).
The Journal report quotes a number of retail finance chiefs who either say markdowns are necessary to begin the year without bloated inventory, or who see these discounts as a way to entice customers.
“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,” said Bath & Body Works CFO Wendy Arlin, whose company reported positive results last week heading into the holidays.
As PYMNTS reported last week, many retailers aren’t waiting for Friday to begin offering discounts. Walmart, for example, held three sales events every Monday this month, culminating with its Cyber Monday blowout on Nov. 28.
“Black Friday has evolved over the years from a single day to an entire season and is without a doubt the most anticipated shopping event of the year,” Charles Redfield, executive vice president and chief merchandising officer for Walmart U.S., said in a press release on the plans.
Meanwhile, Mastercard has issued a positive forecast for Black Friday, with its SpendingPulse report last week anticipating a 15% growth in retail sales on the day after Thanksgiving.
“Expect Black Friday shopping to be in full force across channels this year,” said Steve Sadove, senior adviser for Mastercard and former CEO and Chairman of Saks Incorporated. “While retailers have already been heavily discounting this season, consumers and retailers are likely holding out for some special offers to land on the biggest promotional day of the year.”
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