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Bargain-Hunters Show Black Friday May No Longer Matter

3 December 2014 in Trading Ideas

Initial reports on the four-day holiday shopping period beginning this past Thanksgiving were glum: the National Retail Federation said that both online and in-store sales dropped 11% from a year ago – even with many stores opening earlier than ever on Thanksgiving Day.1

As the New York Times reported, the web failed to attract more spending than it did last year, despite many retailers offering the same aggressive online discounts as they did at their stores. The average person shopping over the weekend spent $159.55 at online retailers, down 10.2% from a year earlier.

But not so fast – as a Los Angeles Times report earlier this week pointed out, a bad Black Friday doesn’t necessarily mean shoppers are saying humbug to holiday shopping, or to discounts. According to the paper, holiday promotions that debuted as early as October resulted in a sharp decrease in sales during the traditionally huge Black Friday weekend.2

Many retailers including Wal-Mart and Target were touting holiday promotions – much of it online – weeks before Thanksgiving.

“With the Internet open 24/7, that’s taken some of the luster off of Black Friday,” Charles O’Shea, an analyst at Moody’s Investors Service, told the LA Times. “It’s not make or break anymore.”

Indeed, as the LA Times pointed out, that make-or-break time is now the entire holiday season. Retailers are nervous about getting a jumpstart on rivals and have stretched the gift-buying season even longer. “Every day is Black Friday and every minute is Cyber Monday,” Shay said. “It’s going to be a dogfight for the consumer every day, every minute.”

On the other hand, the underwhelming Black Friday weekend could mean further discounts are coming. Ken Perkins of industry research firm Retail Metrics told the New York Times that the perceived weak results could pressure retailers to cut prices even more aggressively, which risks hurting their bottom lines.

Discounts reaching 50% to 70% were becoming the norm, Perkins said. “These deeper discounts are an absolutely necessary entry cost to get consumers into stores and onto websites,” he added. Discounts are also aimed at the extra money that some consumers might feel they have due to lower gas prices.

Perkins said Wal-Mart came out as the “undisputed leader” in store traffic over the weekend, while Best Buy, Target, Old Navy and Kohl’s were also busy Thanksgiving night.

Wal-Mart and Target also said their online sales surged over the holiday period, albeit from relatively low levels, the Times said.

The stocks of those two companies comprise a 28.7% weighting in the Discount Nation motif, which has risen 7.2% in the past month. During that period, the S&P 500 has increased 2%.

Over the past six months, the motif has gained 21.4%; the S&P 500 has risen 7.8%.

1Hiroko Tabuchi, “Black Friday Fatigue? Thanksgiving Weekend Sales Slide 11 Percent,” nytimes.com, Nov. 30, 2014, http://www.nytimes.com/2014/12/01/business/thanksgiving-weekend-sales-at-stores-and-online-slide-11-percent.html?src=me.

2Shan Li and Javier Panzar, “Black Friday weekend sales slump amid holiday bargain marathon, latimes.com, Nov. 30, 2014, http://touch.latimes.com/#section/5/article/p2p-82137413/.