Why Black Friday Sales Declined

Despite aggressive promotions, retail sales on the Thanksgiving and Black Friday weekend declined, with strong online sales growth being offset by declines in bricks-and-mortar sales, Wedbush’s Seth Basham said in a report.

Basham mentioned that the decline was partly due to sales being “pulled forward with earlier promotions” and partly because trends remained subdued following the “presidential election-related distraction” earlier in November.

Online Versus Brick And Mortar

Online retail sales rose 17.7 percent year-over-year to exceed $5 billion during Thanksgiving and Black Friday, while brick-and-mortar retail sales were down 5 percent, including a sharp 10.4 percent decline on Black Friday, according to RetailNext.

Overall retail sales declined more than 2 percent during the two-day period, assuming brick-and-mortar sales account for ~85 percent of the total, Basham mentioned.

Earlier Promotions Pull Sales Forward

“More retailers pulled Black Friday promotions earlier this year, likely pulling traffic and sales from Black Friday itself [...] Consumers appeared less enthused by the actual Black Friday event, preferring to shop earlier and online to avoid crowds but still receive great offers,” the analyst noted. He added that Home Depot Inc HD and Lowe's Companies, Inc. LOW were at risk of missing expectations, while Wayfair Inc W's performance was likely strong.

Bed Bath

Bed Bath & Beyond Inc. BBBY offered more aggressive online and shipping promotions, while it repeated last year’s promotions for in-store customers. In-store traffic remained weak on Black Friday and through the weekend.

“We see more downside than upside to BBBY’s F3Q16 comp estimate of 0.5 percent vs. 0.4 percent consensus and EPS estimate of $0.99 vs. consensus also at $0.99,” Basham commented.

Williams-Sonoma

Williams-Sonoma, Inc. WSM witnessed lackluster traffic at Pottery Barn and Williams-Sonoma brand stores across the United States through the holiday weekend.

Although the company’s sales trends improved from earlier in November, they remained soft despite easy comps. Williams-Sonoma could meet expectations, given its conservative sales and margin guidance, the analyst stated.

Pier 1 Imports

Pier 1 Imports Inc PIR largely repeated last year’s promotions. Although in-store traffic was lackluster during Black Friday, there was an uptick over the weekend. “Even after a soft start to November, we believe the company is on track to meet its guidance for F3Q,” the Wedbush report noted.

Tempur Sealy International

Tempur Sealy International Inc TPX's promotions were broader and more aggressive than last year and helped boost sales. “We believe the quarter is on track, but with more downside than upside risk,” Basham wrote.

Select Comfort

Select Comfort Corp. SCSS likely witnessed a sharp year-over-year increase in traffic and sales. The analyst mentioned, however, that the guidance implies mid-40 percent comps, which could “prove challenging.”

Ratings And Price Targets

• Bed Bath & Beyond: Neutral, $42.
• Home Depot: Neutral, $145.
• Lowe's: Neutral, $73.
• Pier 1 Imports: Neutral, $4.
• Select Comfort: Outperform, $25.
• Tempur Sealy International: Neutral, $55.
• Wayfair: Outperform, $40.
• Williams-Sonoma: Neutral, $53.

Retail ETF SPDR S&P Retail (ETF) XRT last traded at $46.07 and is up 1.68 over the last five trading days. Over the last month, the ETF is up 9.35 percent, and year-to-date, XRT is up 6.54 percent.