Why Retail "Doomsday" Rhetoric May Be Overdone

A record $9.1B was spent online for Black Friday, marking a 2% increase from year-ago sales. According to data from Adobe Analytics, electronics were one of the largest contributing factors to the rise, with sales up 221% from a typical day in October. Smart home sales rose 271%, and audio equipment 230%. Toy sales were up 285%, and exercise equipment spiked 218%. Cyber Monday then followed, marking the shopping holiday’s 17th run since launching in 2005. Adobe Analytics has already called for a new record for the event, forecasting over $11.6B in total sales. 

Bank of America made note of this 2-3% annual growth rate, which came in ahead of the firm’s 1% growth forecast for Black Friday. The analysts said that with Black Friday results exceeding estimates, they now see potential for the online holiday season (falling from November through December) to improve from October levels. BofA said this seemed to result from wider discounts this year versus last, namely in footwear, apparel, and luggage. The note also stated that, "although elevated inventory levels could indicate gross margin pressure for retailers this holiday season, we believe 3P eCommerce retailers (i.e. Amazon) should be more insulated."

Keybanc echoed a similar sentiment, saying that as anticipated, promotions were higher on a year-over-year basis. The analyst said their checks showed solid traffic, but not strong, although he named Nordstrom (JWN) and Lululemon (LULU) as two retailers witnessing strong traffic trends and longer checkout lines during the highly-watched shopping weekend.

And while it’s impossible to ignore some of the steep year-to-date losses many retailers have suffered, November has been kinder to several of these names. Through Monday’s close, Etsy (ETSY) is one of the S&P 500’s best monthly performers, +27% month-to-date. Under Armor (UAA) has risen 26%, Ross Stores (ROST) +21.6%, PVH Corp. (PVH) +21.5%, and Bath & Body Works (BBWI) and Best Buy (BBY) both clocking 20% month-to-date gains. Even Target (TGT), which witnessed one of the most sizable post-earnings sell-offs this quarter, is up +0.7% now for the month. However, Amazon (AMZN) – one of the most closely watched for consumer health – remains down over 8%.

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