In the new economy, a disappointing Black Friday and Cyber Monday could send retail stocks tumbling and investor sentiment out the window. With the current uphill battle stocks are facing, and the looming possibility of a bear market, any bad news from the traditional post Thanksgiving shopping spree could break the retail sector. Investors and analysts will be watching and waiting for the results as the annual kickoff to holiday shopping rolls through.
In the week leading into Black Friday, which was created to get retailers into the “black” or profitable for the fourth quarter, retail stocks were down. As reported by the Financial Times, the S&P 500’s consumer discretionary sector was down 3.5 percent. Only 17 of its 65 individual companies were trading positive week-over-week.
Third quarter earnings are a large factor behind many of the companies trading lower and a few, like Foot Locker, trading positive. Some stocks like Home Depot, Macy’s and Walmart saw price drops despite reporting robust earnings. The current market is unforgiving, and any negative news or decreased guidance will send investors running for the door.
One likely outcome of the weekend is online retailers stealing the thunder from traditional brick and mortar stores. This would result in traditional retail stocks slumping, and the markets as a whole taking another downturn.
Adobe published their annual black Friday report. Altogether the firm anticipates $124.1 billion in online sales. The impressive figure represents an increase of 14.8 percent year-over-year. Meanwhile, Adobe is expecting just a 2.7 percent increase in traditional retail sales. On Cyber Monday alone Adobe anticipates $7.7 billion in sales, an increase of 17.6 percent year-over-year.
“As online shopping surges with another record-breaking holiday season, the retailers with compelling websites coupled with physical store locations will have the advantage,” said John Copeland, Adobe’s head of Marketing and Customer Insights. “Many shoppers want to interact with retailers’ products and the brand in-store, and the ability to pick up online orders in-store within a matter of hours can’t be underestimated.”
Another figure, presented by the National Retail Federation, predicts that 164 million consumers are planning to shop over the holiday weekend. Additionally, another report from the NRF predicts a 4.1 percent increase in individual consumer spending this year.
“The holidays are just around the corner and consumers are ready to shop,” said NRF President and CEO Matthew Shay. “Confidence is near an all-time high, unemployment is the lowest we’ve seen in decades and take-home wages are up. All of that is reflected in consumers’ buying plans. Retailers expect strong demand this year, and are prepared with a wide array of merchandise while offering strong deals and promotions during the busiest and most competitive shopping season of the year.”
With all eyes on traditional retail and many investors hedging their bets on the edge of a bear market, the results of the next week could make or break a number of stocks. These include J.C. Penny, Bed Bath and Beyond, and Macy’s, all of which are trading down leading into the holiday weekend.