I hope you’re having a fantastic Thanksgiving.
This year I’m enjoying the holiday with my family in the charming colonial city of Cajamarca. It’s nestled in the Andes mountains of Peru. So, you won’t see me fighting the crowds tomorrow. That’s just about the last thing on my mind at the moment.
Life is far too short to explore the depths of human misery displayed the Friday after Thanksgiving each year.
Lines forming the night before…
Fights over boxes with fellow shoppers…
Whatever money I would save isn’t worth the lifetime of bad karma I’d provoke fighting for a space in the mall parking lot.
Still, if you’re in the retail business, Black Friday matters because it gives you an indication of what to expect for the remainder of the holiday shopping season.
The Black Friday Indicator
Nearly one-third of all retail sales happen between Thanksgiving and Christmas. If sales bomb on Black Friday, it can be a bad sign of things to come.
Anymore, Black Friday is something of a changing concept. Stores desperate for a finite number of customer dollars started opening earlier and earlier. Now, Thanksgiving Thursday is a major shopping day. The way I see it, it’s unacceptable to leave your family to go shopping, or work for that matter, Thanksgiving. Any decent society understands that it’s a time for family. It should be outlawed.
And internet shopping has taken some of the sense of urgency out of the whole endeavor. I haven’t gone Christmas shopping in an actual brick-and-mortar store in years.
Nevertheless, you’re going to be blasted with Black Friday news stories over the next several days, as analysts try to glean whatever information they can about the health of the consumer.
But we don’t have to wait for Black Friday for that.
There’s already plenty of retail news to digest.
Numbers That Matter
Upscale department store Nordstrom (NYSE: JWN) reported earnings last week, and its sales were down about 2% over the past year — though its profits and profit margins both came in better than expected.
A 2% sales decline isn’t catastrophic, of course. But it shows that even wealthier investors might be showing a little more restraint these days.
For middle-class and working-class America, the story doesn’t look so great.
Macy’s (NYSE: M) reported earnings last week as well, and it wasn’t pretty. Same-store sales were down 3.9%, and management specifically cited “lower-tier” malls as a major source of weakness. Discount retailer Kohl’s (NYSE: KSS) also took a beating after reporting disappointing earnings.
Away from department stores, the numbers have been a little better.
Home Depot (NYSE: HD) disappointed earlier this month, but rival Lowes (NYSE: LOW) had a solid quarter, showing that Americans are still feeling confident enough to invest in their homes.
But perhaps the most interesting thing is the strength of discount stores like Walmart (NYSE: WMT) and Target (NYSE: TGT). Walmart and Target both pleasantly surprised Wall Street this quarter, and both companies were very upbeat about the upcoming shopping season.
A Few Takeaways from All This
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To start, the weakness has been most concentrated in department stores, which have been struggling as a group for years.
Apparel sales in particular have been weak. This could partly be attributed to weather or to current styles not resonating with consumers this year. (The return of “mom jeans” from the 80s is just flat-out awful.)
Also, the stores that have figured out how to compete with Amazon.com in e-commerce are broadly doing well. Improved online sales were a big part of Walmart and Target’s story.
The stock market still looks dangerously overpriced and overly dependent on Fed stimulus.
My outlook over the next five years or so is decidedly bearish. But, for the time being, it looks like the path of least resistance is for the market to go higher.
And as for Black Friday… don’t debase yourself by fighting with the unwashed masses for that last bargain-basement blender on the shelf. That’s no way to live your life.
Stay at home. Eat some pumpkin pie. And spend some time with your kids.
Or relax and watch some football. That’s my game plan. My beloved TCU Horned Frogs are scheduled to play West Virginia tomorrow at 4:00 p.m. ET.
Whatever you do, don’t subject yourself to the madness of Black Friday. It’s never worth it.