U.S. retail sales grew 8.5% this holiday season: Mastercard

Steve Sadove, Mastercard Sr. Adviser & Fmr Saks Chairman and CEO, joined Yahoo Finance Live to discuss the biggest trends out of the 2021 holiday shopping season.

Video transcript

- The reason we have you with us today is because, you know, Mastercard has released its SpendingPulse holiday season wrap-up, and the numbers look really good. I mean, the headline is that US retail sales grew 8.5% this holiday season. But when you break it down, it's looking a little bit healthier than just that headline, right?

STEVE SADOVE: Oh, absolutely. This was a great year for the consumer, for retail. Overall sales up 8 and 1/2%, e-commerce up 11%, and I think that the big story is people went back to stores. You had 8% growth in brick and mortar, and brick and mortar sales were above the pre-pandemic levels, so that you have the consumer shopping. They obviously have cash in their pockets. The savings rate was up.

And people were concerned about whether the consumer would come out for the holiday season. It was an early season. You saw it in the October numbers. It continued through November and December. The retailers had warned, because of the supply chain issues, get out there. You may run out of product.

Well, the consumer went out. They shopped. I think discounting was lower than normal, which would tell you that the retailer margins are probably going to hold up during the season, even though they obviously had higher labor and supply chain costs. But it was overall a very good season.

And then you talk about some of the sectors. And whereas we were at staying at home during the first year of the pandemic, buying at home products, this year people were out buying apparel and jewelry. And they were in the department stores. You know, we have a secular decline in department stores, and we were seeing growth this year of 21%, in terms of the performance versus year ago, but 11% ahead of '19. Those are really strong numbers.

BRIAN CHEUNG: Steve, Brian Cheung here. I wanted to ask about the timing of all of these purchases, because there was the concern that, because of the supply chain issues, everyone was told to kind of pull forward the shopping times, get ahead of it. And that's why you saw maybe those October numbers, ahead of the traditional holiday period, which begins November 1 is my understanding.

Do you think that pull forward took away the steam from the later, maybe early December, buying, or did you see that remain strong throughout the last few weeks?

STEVE SADOVE: You really saw strength throughout the season. This isn't new this year. You remember, Amazon Prime Day was back in mid-October, October 11th or so a couple of years ago. So this phenomenon of moving it earlier has started and is continuing. You saw a very good Thanksgiving period. That week we saw about a 14% growth, and then it continued through the month of December.

If I look at October, November, and December, in the months, in terms of overall performance in the month, there's not that much variation month to month. It was a strong quarter throughout the entire period, through the December 24th time frame.

- Steve, I may be comparing apples and oranges here, but help us understand, because investors are going to make decisions based on some of this data. E-commerce sales compared to 2019, for November 1 through December 24, up 61.4%, department store sales up 11%. I get that the department store sales being up 11% is healthy. But why would I perhaps look at a department store retailer as being on the right path, when you see such incredible growth in e-commerce?

STEVE SADOVE: Well, it's a little bit of apples and oranges. Start with the e-commerce. E-commerce, prior to the pandemic, was about 12% of commerce. You saw this probably three year acceleration of e-commerce going to 18% in the first year of the pandemic. And now you're around 20% during the holiday season.

So you have this longer-term trend towards people wanting to shop wherever they want to shop, and where they feel safe. So a lot of people are buying online. Some of them are buy online, pick up in-store, pick-up curbside. But 80% of commerce is still in a store.

The department stores had been declining for a long period of time. They were a big-- they got hurt badly during the beginning of the pandemic, when nobody went into a mall. They weren't going into department stores.

As people get more comfortable, and started going back into the stores in the malls, department stores have come back. Now, a lot of them have reinvented themselves. They're doing things differently, creating new alliances, experiences.

You have the traffic in the department stores for the first time in a long time. Right now, I would argue that they have an opportunity to build that customer base for the longer term. They'll come into the department store. You see the traffic. And the question is, do they deliver the experience that the consumer says, hey, this is really great. I'm going to keep coming back.

Time will tell. I'm optimistic because I see this great start, that, you know, they're on a path that looks pretty promising. But again, it's going to be in execution and whether or not they have the labor, the people, that are giving the service that people wanted during this holiday season. But believe me, this is a great trend for the department stores relative to what they had seen over the last several years.

BRIAN CHEUNG: And then lastly here, Steve, what about jewelry? What was interesting, it caught my eye, 26.2% increase this holiday season compared to pre-pandemic holiday season. Is there an at-home reason for that, or is it just a lot of people got married?

STEVE SADOVE: I think people want to express themselves. And they're gifting, the two categories that I found most-- three actually, department stores we talked about. Apparel and jewelry, apparel was up almost 50%. People have no longer wanted to stay at home in their sweat clothes. And they are going to parties and weddings and outings and events.

And so the apparel category taking off, and it's about newness and freshness and fashion. And similarly for jewelry, people want to express themselves. They're buying watches. They're buying jewelry, the watch numbers are stunning.

So I feel, really, there are so many elements of this holiday season that says the consumer was strong, healthy, despite supply chains, and despite the fact that every item that they wanted wasn't there. They had to make substitutions.