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Strategy These stores made big moves to defy the retail apocalypse

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Big efforts to draw in customers during the holiday season paid off for brands like Target and Kohl's.

Macy's, JCPenney, and Kohl's reported stronger than expected sales. play

Macy's, JCPenney, and Kohl's reported stronger than expected sales.

(AP Photo/Bebeto Matthews)
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  • The holiday season is traditionally the busiest time of the year for retailers.
  • This year, some stores broke sales records.
  • Their efforts could help postpone the effects of the retail apocalypse.

After a dismal start to 2017, US retailers had a lot to prove this holiday season.

Thanksgiving and Christmas is the busiest and most important time of the year for the retail industry. During the most recent holiday season, many companies put out a strong performance, potentially delaying the negative effects of the retail apocalypse while breaking sales records.

Retail sales from November 1 through Christmas Eve climbed 4.9% from 2016, the highest growth rate since 2011, according to data from Mastercard SpendingPulse.

"This year was a big win for retail," Sarah Quinlan, senior vice president of market insights at Mastercard, said in a statement.

While the strength of the US economy certainly played a part, new strategies put in place by retailers ultimately engaged shoppers, according to Quinlan.

Turning a corner

This week, Target, Lululemon, American Eagle, and Kohl's all raised their estimates for fourth-quarter earnings after reporting stronger-than-expected holiday sales numbers.

Target credited its positive same-store sales growth to strong sales online. This was aided by changes to stores, which had been transformed into fulfillment centers for digital orders earlier in the year. This meant that customers were able to order online and collect in stores.

In November and December, the stores fulfilled 70% of the company's digital orders and ultimately were responsible for driving 80% of the company's same-store sales growth, the company reported.

"The continued leveraging of the store base to facilitate online shopping is a key component of this strategy, and the level of store fulfillment of online orders for holiday is impressive," Moody's Lead Retail Analyst Charlie O'Shea said in a note to clients.

Going nuts on Black Friday play

Going nuts on Black Friday

(Adam Hunger/AP Images for Target)

Athleisure brand Lululemon also experienced stronger-than-expected holiday sales and subsequently increased its top-end estimate for net revenue in the fourth quarter by $30 million – from $885 million to $915 million.

It broke brand records at the end of 2017 after reporting its highest traffic and largest revenue day ever on Black Friday and its largest day ever of online sales on Cyber Monday.

Overall, positive results were driven by strong sales online and its "on-trend" pants, Oliver Chen, senior equity research analyst for Cowen and Co., told Business Insider.

Women's and men's bottoms, its biggest category, continued to excel and was helped by the launch of a new fabric called "Everlux" in September.

"We believe Lululemon's ability to offer fabrics that serve various purposes and offer different technical innovations allows women to buy multiple fabrications of the same silhouette (a pant for yoga, a pant for spin, a pant for run, etc.)," Chen wrote in a note to investors this week.

To capture as much traffic as possible, Lululemon also set up 22 pop-up stores in high-traffic areas and malls across the US during the holidays.

American Eagle, which is known as one of brick-and-mortar retail's few sweet spots, having reported 11 consecutive quarters of same-store sales growth, said its same-store sales growth jumped 8% this November and December versus the year before.

Traffic was largely driven by denim wear and its lingerie division, Aerie, according to Cowen and Company. The Aerie brand has increasingly been gaining market share from the former kingpin of women’s lingerie, Victoria's Secret, whose parent company L Brands reported a decrease in same-store sales growth in its most recent quarterly results.

Kohl's same-store sales soared in the holiday shopping period. play

Kohl's same-store sales soared in the holiday shopping period.

(Facebook/Kohl's)

On Monday, Kohl's trumped competitors Macy's and JCPenney with an impressive 6.9% surge in same-store sales during November and December. These stores previously reported a growth of 1% and 3.4% respectively during the holiday.

While Business Insider's Hayley Peterson reported that Kohl's has been relatively immune from the drop in mall traffic this year, as the majority of its stores (9 out of 10) are located outside of enclosed shopping malls, it has also benefited from its new strategies to draw in the customer.

In February 2017, management confirmed that its active and wellness categories, which made up 15% of the business, would become a major initiative for 2017.

"We've planted a flag … to be a destination for active and wellness," with sales "dramatically" accelerating in the holiday period, CEO Kevin Mansell said at the ICR Conference in Orlando, Florida, on Tuesday.

Mansell said that the company's digital business was up 15% for the first three quarters of the year and soared 23% during the holiday period.