Ah, Black Friday. That fateful day every year when American consumers rush to retail stores everywhere to battle it out for the ultimate holiday savings. And for investors, the market usually responds. Because it’s such a historically good shopping day, investors often use it as a barometer for the success of the holiday shopping season as a whole.
So how did this year’s Black Friday go? Well, you may have noticed that the market was down on Monday…which tells us the shopping bonanza wasn’t quite as bonanza-y as investors were hoping. In fact, the National Retail Federation reported that sales were down 11% from 2013.
So why did Black Friday sales go down?
Extended Discount Windows
One explanation for the less than stellar sales could be the fact that retailers have been extending the time period for their discounts. According to Adweek:
“Retailers—both in stores and online—made deep discounts in the days and weeks leading up to the holiday, rather than saving them all for one day.”
If shoppers have reason to believe that the Black Friday sales aren’t unique, or that they will continue to see low prices throughout December, there is little incentive for them to battle the crowds on Black Friday.
This could be good news for investors, because a lackluster Black Friday doesn’t exactly mean a lackluster holiday season as a whole. In fact, the CEO of the National Retail Federation himself expects the holiday season in aggregate to grow 4% over 2013, saying that earlier discount offers were simply moving purchases from Black Friday to earlier in the month.
Shoppers Moving Online
Of course, the easiest way to avoid those abusive holiday crowds is to shop from the comfort of your very own home. Indeed, more people did their holiday shopping via “click” in 2014 than ever before. IBM reports that online shopping traffic on Thanksgiving Day grew 13% from last year. Good news for investors who have online retailers in their portfolio.
Another interesting highlight from IBM’s data is that, for the first time, more online traffic was coming from mobile devices than from PC’s.
“Thanksgiving Day mobile traffic accounted for 52.1 percent of all online traffic – the first time mobile devices have outpaced their PC counterparts for online browsing.”
So it looks like shoppers aren’t only too lazy to actually leave their house to go shopping, they’re also too lazy to boot up their computer! Although with the enormous capabilities of tablets and smartphones these days, who can blame them?
Of course, it wasn’t all bad. Some companies were able to exceed expectations this Black Friday, despite overall sales going down.
Black Friday Winners:
Because online shopping increased so much this year, it’s no surprise that the country’s largest online retailer saw a lot of that traffic. Marketwatch reports that Amazon’s sales rose 24% on Black Friday, and a whopping 46% on Saturday, both metrics far exceeding the industry average.
Apparently the items shoppers are willing to leave their house to buy are electronics. CNBC reported that their sales were up 16% over last year. But that isn’t to say that all of Best Buy’s traffic was on foot; they saw so much online traffic that BestBuy.com crashed due to overwhelming demand!
Two of the top three selling items on Black Friday were gaming consoles, so naturally GameStop came out a winner for sales. Lines were seen around the country for GameStop’s now traditional midnight opening, and shoppers were treated to bundled offerings of the Playstation 4 and Xbox One, as well as discounted pre-owned games.
Kohl’s and Family Dollar, two chains known for their extreme discounts, both had better than expected sales, indicating that despite the recent pick up in the economy, consumers may not yet feel comfortable splurging on holiday gifts.
Not the End of the World
The market’s negative reaction on Monday (both the Nasdaq and S&P 500 were down roughly 1%) would indicate that investors do correlate Black Friday numbers with the overall success of the holiday season for retailers… but should they?
US News and World Report doesn’t think so; this chart shows that Black Friday sales and overall holiday sales don’t always have the same patterns. In a tough economy, for example, shoppers might lean on Black Friday more because they need the discounts. Whereas a good economy might lead to more shopping throughout December, but not necessarily on the day of the biggest sale.
Furthermore, great Black Friday numbers aren’t always positive indicators for a company’s health. Sure, sales volumes are going up, but what role do deep discounts play in profit margins? This very concern is attributed to Best Buy’s drop in stock price on Monday. Yes, you read that right, despite being a “winner” in Black Friday sales numbers, BBY went down 5% when the market opened. A good reminder that sales volumes are nice, but might not always tell the whole story.
What do you all think? Are you Black Friday believers? Or is the holiday shopping environment changing enough that it doesn’t matter so much anymore?