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Black Friday Losing Luster With Modest Holiday Sales?

Posted
10/30/2013 4:53:00 PM
By: Investor's Business Daily
Referenced Stocks:JCP;KSS;M;MSFT;SNE

Has Black Friday lost its mojo? Retail experts say it has.

Traditionally the day after Thanksgiving has kicked off the holiday shopping period and ranked as the season's biggest sales day. But this year worries over jobs, the economy and fiscal-policy uncertainty threaten to take cheer out of gift-buying for many Americans, particularly low-to-middle-income consumers.

The result: Competition for a slice of the holiday spending pie has heated up among retailers, who've been inching ever-earlier with promotions in recent years. For 2013, store chains aim to jumpstart holiday shopping with savory deals well ahead of Nov. 29, taking the limelight off Black Friday as the traditional day for the biggest bargains and best sales receipts.

"The month of November will be incredibly promotional this year with key items at great prices during limited hours to try to drive that holiday frenzy we used to know on Black Friday," said Marshal Cohen, NPD Group analyst.

Shopping Clock Resets

Early deals will appear aplenty from retailers such asMacy's ( M ),Kohl's ( KSS ) andJ.C. Penney Co. ( JCP ) that will open stores on Thanksgiving night -- and more retailers are expected to follow suit.

"As more stores open up on Thanksgiving Day for the holiday shopping experience, Black Friday will no longer be the single biggest sales day," said Ken Perkins, president of Retail Metrics. "Given the lateness of Black Friday on the calendar and given how promotional retailers are likely to be this year because of the highly competitive environment, we're likely to see more aggressive deals taking place prior to Black Friday."

While Perkins says Black Friday is "not going to be as important as it had been," the day remains enough of a tradition that bargain hunters will likely come out in full force for it, and retailers will feed their appetite with plenty of deals.

Shoppers will be seeking bargains on electronic devices such as smartphones, digital tablets, video gaming systems, video games and toys.

What Black Friday's apt to lack is allure, with Thanksgiving Day and an online sale day after Thanksgiving Weekend -- Cyber Monday -- now sharing the limelight.

"I suspect Black Friday itself will be OK, but some of that demand is being shifted to Thursday and Cyber Monday," said Michael Niemira, chief economist for the International Council of Shopping Centers. "As a whole, we're expecting a relatively decent but modest performance for the holiday season."

Niemira forecasts a "moderate gain" of 3.4% vs. a year ago in GAFO (general merchandise, apparel and accessories, furniture and other) sales for November-December. That would be a "tad" stronger than last year's 3% increase, he says.

As for Black Friday alone, retailers are really going after the "bargain hunting" consumer -- those tending to be in lower-income households, says Niemira, and they're "hurting more than the upscale consumer."

Stores will have to be "more aggressive" to get people into their stores, otherwise they will lose market share, he adds. And with the economy growing in the range of just around 2% a year, "it's a market share game" for retailers.

Perkins concurs that the Black Friday weekend -- Thanksgiving Thursday through Sunday -- is apt to be "very competitive with modest sales gains."

"The consumer mindset has taken a bit of a beating as a result of the government shutdown and looming debt-ceiling debate," he said.

Consumer confidence slumped sharply in October to the lowest reading in six months, the Conference Board's index showed Tuesday. Perkins questions the extent to which Americans' confidence will rebound "knowing it was only a temporary Band-Aid that pushed these issues past the holiday into early next year."

Consumers are concerned about their jobs, and the majority of mid-and-lower income consumers aren't feeling "particularly great" about the economy or their earnings, he says.

"Therefore, they're likely to be focused on promotions and stretching every dollar they have," he said. "That sets up for a very competitive holiday season."

Brian Sozzi, CEO of Belus Capital Advisors, expects "damage from the shutdown" to show up through the entire holiday season. He says discounting at department stores has been rising each week since the end of August.

Retailers have a shorter holiday selling season this year with 26 days between Thanksgiving and Christmas, vs. 32 last year. Because of it, he expects more of Black Friday sales "will be pulled forward," into early December.

"There's nothing out there to suggest the holiday season will start on a robust note," Sozzi added.

"Retailers disappointed investors with their second-quarter results and they disappointed with their initial third-quarter guidance," he said. "When they start to report third-quarter results in the next two weeks I think they will disappoint with their fourth-quarter holiday outlooks."

Selfies In The Snapshot

Cohen expects total retail dollar sales for the Black Friday bargain period -- from Nov. 22 to Dec. 2 -- to rise between 3.5% and 4% vs. a year earlier. Key to his forecast is the fact that NPD surveys show that self-gifting will remain "stable" this year for the holiday season. Self-gifting, he says, represents 19% of all holiday purchases.

"As long as the self-gifting number stays healthy and high, it's critical to the success of the holiday and Black Friday," he adds. It contributes in a huge way to Black Friday because some Black Friday items are bought as gifts for oneself."

He sees retail sales from Black Friday through the week after Christmas rising 2% to 2.5% vs. a year ago.

Holiday online retail dollar sales will continue to grow at a faster pace than total sales, he predicts, rising at a minimum of 5% from last year, including Black Friday.

Beyond electronics, footwear and beauty products should do well on Black Friday, says Cohen. And new video game consoles, including theSony ( SNE ) PlayStation 4 andMicrosoft ( MSFT ) XBox One coming out in November before Black Friday, should be hot sellers.

Off-price retail operators such asTJX Cos. (TJX) andRoss Stores (ROST) are apt to stay "winners" and have "pretty strong" days on Black Friday weekend, says Perkins.

More discount-oriented stores such as teen-focused deep discounterFive Below (FIVE) and dollar stores -- such asDollar General (DG),Dollar Tree (DLTR) andFamily Dollar Stores (FDO) -- are expected to be "strong" on Black Friday weekend, Perkins says.

High-end chains such as fashion houseMichael Kors Holdings (KORS) and upscale jewelry retailerTiffany & Co. (TIF) aren't involved in heavy promotions for Black Friday, says Perkins, but they should fare well for the holiday season as a whole.

It will be a "free for all" on Black Friday weekend for mid-tier department stores like Kohl's and J.C. Penney, specialty apparel retailers and teen apparel retailers, he adds.

Perkins says giant discountersTarget (TGT) andWal-Mart Stores (WMT) will be "primary destinations" on Black Friday weekend, but he questions how strong their sales will be.

The core consumers for retailers in the mid-tier and moderate space are "hurting," and don't have a lot of excess cash to spend, says Perkins.

Niemira says he doesn't expect retailers to be as promotional this holiday season overall as they were last year, when there were a lot of unplanned promotions as retailers moved into December.

"I'm a little more upbeat on that to the extent that retailers are controlling their inventories," he added. "That will help keep the discounting closer to plan."