Retail

Retailers Are Spooked By Halloween

Caught between the focus on Labor Day and the holiday season, yet another retail event looks like it’s being scorched by the pandemic. Halloween sales are expected to be significantly impacted by social distancing concerns, and some retailers are already warning about the consequences.

“We anticipate that Halloween, a historically significant season in terms of high sales and positive margin contribution, will be negatively impacted by COVID restrictions, including social distancing,” said Dollarama chief financial officer Michael Ross on the company’s recent Q2 earnings call. “We believe it will have a negative impact, but to what extent we do not know. It won’t only impact the top line, but these are part of our highest margin items, the seasonal items, and so depending on the results it might impact our margins.”

Halloween is “the holiday that comes second after Christmas as far as spending goes,” said Tom Arnold, a professor of finance at the Robins School of Business at the University of Richmond. “I don’t think it would be wrong to predict that spending gets cut in half, at a minimum.”

Halloween spending in the U.S. was estimated to top $8.8 billion last year. According to the National Retail Federation, Americans were expected to spend $3.2 billion on costumes, $2.6 billion on candy, $2.7 billion on decorations and $390 million on greeting cards. The NRF has not released any predictions for Halloween 2020.

Not all retailers have been as blunt about the expected Halloween decline, but adjustments are being made, especially in the dollar store and deep discount categories. For example, Dollar Tree reported its Q2 earnings last week and said it was adjusting its inventory to stay away from traditional trick-or-treating and focused instead on decorations and costumes. With the adjustments, the company’s executives were cautiously optimistic about what it called “Fall Harvest” season.

“We think based on what we're seeing from the customer, since they're spending more time at home, they want to decorate their homes and invest in their homes more,” said CFO Kevin Wampler on the Dollar Store earnings call. “So we're seeing those categories. So — we may be different, but with them spending more time at home, they're going to decorate that home since they're there, and we're seeing that in our sales.”

The publicly traded retailer that could be the most adversely affected by the Halloween behavior shift is Party City. The company recently published a survey that shows 96 percent of parents will celebrate Halloween this year; 70 percent of them will seek alternatives to traditional trick-or-treating.

“This prompted the leading party goods retailer and Halloween destination to rewrite the rule book, revealing the newest trends to celebrate safely and easily. Party City inspires customers to mix, match and make it uniquely their own — from décor and celebrations to costumes and accessories, this season screams: “You Boo You!,” according to a company statement.

 

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