The retail battle is at its peak during the holiday season, with offers and promotions flooding the markets. Retailers tried to sweep buyers off their feet with early-hour store openings, huge discounts, promotional strategies and free shipping on online purchases. Despite these efforts, retailers did not hear their cash registers jingle as much as expected. Cheap gasoline, a better job picture and increased consumer confidence also failed to perk up holiday sales, leaving investors perplexed.

The holiday period is crucial for any retailer as it accounts for a sizeable chunk of yearly revenues and profits. So what actually happened?

Data compiled by the National Retail Federation revealed that retail sales during the holiday period (November/December combined) increased 3% to $626.1 billion, falling short of the projected 3.7% jump as well as 4.1% growth registered in 2014. The only bright spot was the digital business. Online sales rose 9% to $105 billion, surpassing the retail trade group’s expectation of 6%–8% growth.

Despite an increase in online sales, the overall holiday season was a disappointing one for retailers. Industry experts blamed unfavorable weather conditions, a strong dollar and shift toward online shopping for the debacle. Demand was weak for cold-weather goods such as coats, sweaters, boots, hats, gloves and scarves. Also, competition was cut-throat and pricing remained aggressive. Macy’s, Inc. (M - Analyst Report), The Gap, Inc. (GPS - Analyst Report) and Zumiez, Inc. (ZUMZ - Analyst Report) delivered dismal performances.

Macy’s informed that comparable sales (comps) on an owned plus licensed basis fell 4.7% in the combined November/December period of 2015. However, Macy’s online sales witnessed an increase of 25%. On the other hand, Gap recorded comps declines of 8% and 5% for November and December, respectively, while Zumiez’s comps fell 13.8% and 8.9% over the same periods.

The Buckle, Inc.’s (BKE - Snapshot Report) comps for the December month decreased 5.4% year over year, following a 7.9% decline registered in November. Urban Outfitters, Inc.’s (URBN - Analyst Report) comparable retail segment net sales, including the comparable direct-to-consumer channel, fell 2% during the holiday period.

It was not a gloomy holiday season for all retailers, as evident from a few exceptions. Despite unusually warm weather, J. C. Penney Company, Inc. (JCP - Analyst Report) went on to post comps growth of 3.9% for the combined November/December period. L Brands, Inc. (LB - Analyst Report) delivered positive comps results of 7% and 8% for November and December, respectively, while The Cato Corp. saw its comps rise 6% in December, following 1% growth in the preceding month.

The Final Verdict

While unseasonably warm weather resulted in sluggish demand for winter merchandise sales, analysts also pointed out that consumers spend more on electronics, cars, home goods and travel, and less on apparel and cosmetics. Market experts believe that after a dismal holiday season in 2015, challenges await retailers in 2016. Cost containment initiatives, involving headcount reduction and store closures to better withstand competitive pressure from both brick-and-mortar discount stores and online retailers, remain in the cards.

Analysts believe that retailers should be more efficient, while allocating a large chunk of their capital toward a multi-channel growth strategy focused on improving merchandise offerings, developing IT infrastructure to enhance web and mobile experiences of customers, giving their stores a facelift, developing fulfillment centers to enable speedy delivery, implementing an enterprise-wide inventory management system as well as enhancing their relationship with existing and new customers.