The Thanksgiving weekend brought
record sales for retailers who went on to post better-than-expected
November comparable-store sales and are now padding up for the
holiday season. Does this indicate that the retail party has just
begun?
Early hours store openings, huge
discounts, promotional activities and free shipping on online
purchases were enough to lure customers on Black Friday that turned
out to be a bonanza for both brick-and-mortar as well as e-commerce
retailers.
The data released by Swampscott,
Massachusetts-based Retail Metrics, reveals that comparable-store
sales of over 20 companies rose 3.2% beating the expectation of
3.1%. The data provider further added that 57% of retailers
outpaced while 33% missed their expectations. Yes, there were
retailers that stuck to old traditions and were not bold to think
out of the box. These missed the boat and failed to seize the
opportunity of pent-up demand.
Season’s Blast Breaching
Economy
An economy plagued by financial
crisis and high unemployment, remains a bitter truth, but
Thanksgiving, Black Friday and Cyber Monday all have stories to
tell, the story of regained consumer confidence that looked far
stronger than the prior-year period. It seems that consumers who
were saving up for the holiday season, shrugged off the economic
gloom and went from shop to shop to grab the best available
deal.
According to the data released by
National Retail Federation (NRF), sales on the Thanksgiving weekend
surged 16.4% to $52.4 billion. The survey also revealed that as
many as 226 million bargain hunters visited stores and browsed the
Internet over the past weekend compared with 212 million in the
prior year. The average spending per customer rose to $398.6 from
$365.3 in the prior year, over the four-day period from
Thanksgiving to Sunday.
The economy, which was believed to
be heading towards a recessionary downturn early in the year, has
started looking up again. What’s more, consumer confidence remains
high. Conference Board data suggests that Consumer Confidence Index
rose to 56.0 in November from 40.9 in October, and attained the
highest level since July, when the index touched 59.2. This is
prompting consumers to loosen their purse strings.
Further, the data from the Commerce
Department indicates that consumer spending, which represented 70%
of the economy, increased at an annualized growth rate of 2.3% in
the third quarter, reflecting the fastest rate so far in 2011.
What Comps
Say…..
Record Black Friday weekend sales
provided an impetus to the retailers’ November sales who tried all
means to woo customers and gain market share amid fierce
competition and sluggish economy. Total retail sales on Black
Friday, which kicks off holiday sales, rose 6.6% to $11.4 billion
according to the data released ShopperTrak. November
comparable-store sales results are a significant indicator for the
retailers, as it gives an insight of the days ahead.
The saying early bird catches the
worm goes well with the retailer Macy’s Inc. (M)
that for the first time opened its doors at the stroke of midnight
on Black Friday to attract customers. The leading department store
retailer in the U.S. saw its comparable-store sales rising 4.8%
that fared better than what analysts expected.Online sales, which
include sales from macys.com and bloomingdales.com, continued to
show growth momentum in November, soaring 49.6%.
Comps for the luxury department
store, Saks Incorporated (SKS) increased 9.3%,
exceeding the estimate. Ross Stores Inc. (ROST),
the off-price retailer of apparel and home accessories,witnessed a
5% growth in its comps.
Costco Wholesale
Corporation (COST) sustained its sales momentum, and
registered a comps growth of 9%. Excluding the effects of higher
gasoline prices and foreign currencies fluctuation, Costco’s
comparable-store sales climbed 7%.
Limited Brands Inc.
(LTD), a specialty retailer of women’s intimate and other apparel,
beauty and personal care products, posted healthy sales results.
The company’s comparable-store sales for November 2011 rose 7%,
following an increase of 6% in October 2011.
Other retailers that opened their
stores at midnight included Target Corporation
(TGT), Best Buy Co. Inc. (BBY) and Kohl’s
Corporation (KSS).
In contrast, J. C. Penney
Company Inc. (JCP) followed its old tradition of opening
stores at 4 a.m. on Black Friday. The decision hurt its
comparable-store sales that fell 2% compared with an increase of
9.2% in the year-ago period. However, the drop of 6.2% at Kohl’s
comps sales during the month under review came as a surprise,
particularly after it registered a growth of 3.9% in October.
The retail companies targeting lower
and middle-class customers however had a tough time, as their
target consumers remained frugal in spending or did selective
shopping.
Target posted a 1.8% increase in
comparable-store sales that missed analysts’ expectation,
indicating that consumers still remain cautious. The company hinted
that although sales surged on Black Friday, the rise was not enough
to boost its November sales. The company now foresees an intense
competitive and promotional environment in December.
We believe that retailers will leave
no stone unturned to drive sales. But there’s a nagging fear that
if recession-hit consumers decide to be cautious on their spending
in this holiday season or if the economic crisis aggravates, the
picture will only have dull colors. A pick-up in demand would
definitely augur well for the economy.
Unanswered
Questions
Retailers are using different
arsenals to fire on all cylinders. These include offering discounts
and indulging in promotional activities, which are reflecting on
their sales. But we wonder whether these are coming at the price of
margins. Moreover, what impact will these have on the bottom
line?
Let’s
Conclude
The sea doesn’t seem calm, waves are
high and waters are rough. It is evident that customers remain
sensitive to macroeconomic factors including high fuel and energy
costs, credit availability, unemployment levels, and high household
debt levels, which may affect their discretionary spending, and in
turn curtail the sector’s growth and profitability.
Going by the pulse of the economy,
we could see more competitive pricing and new products to attract
shoppers in the holiday season. We believe that retail companies
will move heaven and earth to win the hearts of bargain hunters and
it definitely remains a wait-and-watch story as to who emerges
successful in wooing consumers in this distressed economy.
BEST BUY (BBY): Free Stock Analysis Report
COSTCO WHOLE CP (COST): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
SAKS INC (SKS): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
Zacks Investment Research
LandBridge (NYSE:LB)
Historical Stock Chart
From Sep 2024 to Oct 2024
LandBridge (NYSE:LB)
Historical Stock Chart
From Oct 2023 to Oct 2024