Black Friday & Cyber Monday Raise Optimism For Holiday Fest

The onset of the holiday season this year seems to have ushered confidence in retailers, who had been reeling under a tough environment characterized by increased competition from online retailers like Amazon.com Inc. (NASDAQ:AMZN) and lower footfall. The five-day holiday period starting from Thanksgiving, followed by Black Friday, Small Business Saturday, Monikerless Sunday and Cyber Monday, marked a good start to a promising holiday season.

The spending data from Thanksgiving through Cyber Monday indicates that the U.S. retail industry is ready to shed all worries and embrace a profitable holiday season this year. Data from the nation’s largest retail trade group, National Retail Federation (“NRF”) revealed that more than 174 million Americans shopped in-stores and online during the Thanksgiving holiday weekend, leaving behind its estimate to engage 164 million shoppers.

Further, the trade group estimates that Americans spent an average of about $335.47 during the five-day period, with about $250.78 or 75% spent for buying gifts. Among the shoppers, older Millennials aged between 25 and 34 years turned out to be the biggest spenders this year, spending nearly $419.52 on an average.

Omni-Channel Retail Is In

Apart from improving optimism for the holiday season, the five-day shopping fest clearly reflected that omni-channel has become the order of the day and retailers’ investments toward providing a seamless shopping experience, whether online or in-stores, has paid off big time. The long weekend attracted more than 64 million shoppers to make purchases both online and in-stores. Additionally, there were shoppers who chose to buy only at stores or only online. Notably, the weekend saw more than 58 million people shop only online, while over 51 million people chose to shop only in stores.

NRF revealed that the omni-channel shoppers spent $82 more on average compared with the people shopping only online. Furthermore, average spending of these shoppers was $49 more than people shopping only in stores.

Top Shopping Days – In Store & Online

The two top days for in-store shopping this year were Black Friday and Small Business Saturday, when 77 million and 55 million shoppers, respectively, stepped out of their homes to take advantage of the big deals.

Meanwhile, online shopping was most popular on Cyber Monday with more than 81 million shoppers using their computers, smart phones and tablets to shop. This popular online shopping day raked in online sales of a record $6.59 million, as per Adobe Analytics. Reflecting a $1 billion (or 16.8%) growth from last year, this day marked the largest online shopping day in U.S. history.

Another popular online shopping day, as surveyed by NRF, was Black Friday with more than 66 million shoppers turning to online deals on this day.

Further, shopping through mobile devices was the most prominent trend during this year’s Black Friday and Cyber Monday shopping period, as nearly 63% of customers used their smart phones to make buying decisions while 29% used it to actually buy goods.

The Beneficiaries

Notably, the long weekend had all favorable factors from a pleasant weather to low unemployment rate and improved consumer confidence that encouraged shoppers get going with their shopping lists, in preparation for Christmas. The most popular items on sale during the weekend were televisions, laptops, toys and gaming consoles. Driven by the huge discounts and promotions, retailers witnessed a splurge in traffic and online conversion trends, which is likely to make up for an otherwise tough year.

Further, this five-day shopping fest saw trends reverse for some retailers, particularly department stores, which bore the brunt of a tough retailing environment. Notably, department stores were at the top of this season’s top shopping destinations attracting 43% shoppers. This was followed by online retailers (42%), electronic stores (32%), clothing and accessories stores (31%) and discount stores (31%).

The Black Friday event witnessed some big sales coming from Best Buy (NYSE:BBY) , which aired many lucrative offers shoppers couldn’t resist. Much of this is also attributed to the fact that shoppers have lately realized the importance of in-store purchases for large items for their homes. We believe this trend is surely going to benefit Best Buy this holiday season and into 2018.

Another stock that is ready to make it big this holiday season, knocking down competition from online giant — Amazon, is Wal-Mart (NYSE:WMT) . Apart from offering car loading services for groceries, Wal-Mart is pushing hard to compete with Amazon on price and service grounds.

The success of Black Friday and Cyber Monday sales not only set the cash registers ringing, it also led the retail stocks trade higher. This was particularly true for Macy’s (NYSE:M) , Target (NYSE:TGT) , Best Buy and Home Depot (NYSE:HD) , that witnessed 4.5%, 1.4%, 1.8% and 1.4%, respectively, after a blockbuster Cyber Monday on Nov 27.

This gives all the reasons to be optimistic about the performance of retailers this holiday season. At this juncture, it would be wise to invest in stocks that promise returns this season. Out of the stocks mentioned above, Wal-Mart and Home Depot carry a Zacks Rank #2 (Buy), while Amazon, Target, Macy’s and Best Buy carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Holiday Sales Projection

Overall, NRF projects retail sales for November and December (excluding autos, gas and restaurant sales) to improve 3.6-4% to $678.75-$682 billion, up from $655.8 billion (or 3.6% growth) last year and better than the five-year average sales growth of 3.5%.

Moreover, Deloitte projects holiday season sales to go up as much as 4.5%, while e-commerce sales are envisioned to improve 18-21%.

Bottom Line

The start to the 2017 holiday season certainly looks promising. However, it remains to be seen if this momentum is sustained until the Christmas bells ring and how many retail bellwethers can really take the competition to Amazon.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Home Depot, Inc. (The) (HD): Free Stock Analysis Report

Best Buy Co., Inc. (BBY): Free Stock Analysis Report

Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Macy's Inc (M): Free Stock Analysis Report

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