Retailer stocks have typically outperformed the S&P 500 in the last 10 years, with investor activity usually increasing about 2 weeks before Black Friday. This year, this trend has weakened slightly, yet remains beneficial for the retail sector.
The global economy has not entered a recession and consumers, not only in Poland but also in Europe and the US, have proven surprisingly resilient to inflation, increasing their spending. The retail industry operates like the front line and is one of the first to experience both consumer weakness and a sudden increase in consumer activity. Thanks to the automation of systems and data collections, large networks can quickly react and adjust their prices to demand.
This year’s Black Friday will be a significant indicator of actual consumption need in the main Western markets. The recent results of the fashion-luxury and retail sectors, which have been operating at a higher margin relative to competitors, show a somewhat diversified situation.
Consumers increasingly choose cheaper options and are foregoing prestige. The fashion industry was the first to feel this pressure, where fashion holdings’ stocks like LVMH, Kering, Richemont, Swatch or PVH Corp., fell sharply. Companies producing exclusive goods like Hermes, Ferrari, or Brunello Cucinelli, are yet resisting the decline.
The growing popularity of online sales means a higher emphasis on online offers and likely a decrease in in-store promotions. This shift is not unequivocally positive for the retail industry and may add pressure to margins because of higher order fulfillment costs. The weaker performance of retailer stocks, which have historically performed well shortly before Black Friday, raises concerns about consumer activity and sales results during this period.
During this year’s Black Friday, investors should pay attention to retail sector companies, said Tymoteusz Turski, a stock market analyst at XTB, in a conversation with MarketNews24. For example, during Black Friday and the week after it, in the last 20 years, companies from the S&P 500 behaved very mixed, with 50% reporting declines and 50% reporting increases. Nevertheless, the retail sector companies usually performed better. Interesting to note are companies trading online, whose sales growth, for example, Amazon, increases.
Before Black Friday, the most significant gains were made by the shares of New York department store networks Macy’s, Marks & Spencer, and Kohl’s. However, over the past month, Macy’s gained disappointingly little, over 2.5% (compared to an average of 12.8%), Marks & Spencer shares did not record significant changes in value, Kohl’s fell by 20%, and Capri gained 6.5%, below the rating measure. Allegro shares don’t seem to benefit from this trend (this year too), and Dino Poland is weaker against its American equivalent, Walmart, but clearly better than Tesco or Jeronimo Martins.
According to Bloomberg data, observed sales growth of flagship retailers Walmart and Kohl’s is slower than in 2023; 1.3% y/y for Walmart, while Kohl’s registers nearly a 10% decrease. For Target, Walmart’s biggest competitor, the sales are falling by 1.2% y/y, and in Best Buy, where consumers are hunting promotion related discounts on electronics and home appliances, the y/y growth is 5.5%.
The incoming, current data suggest that the largest retailers in the US are seeing a decline in the number of transactions year-on-year, except for Walmart, where the growth is 0.4%. Comparable store sales at Walmart, which attract promotion and savings-oriented consumers are expected to grow by 3.9%, for Target only slightly year-on-year, and for Best Buy and Kohl’s – drop.
During Black Friday in 2023, the growth of buyer visits weakened in Target, Best Buy, and Kohl’s. Then, only in Walmart, the traffic was stronger than in 2022. This year, this trend is unlikely to change.
– Target was recently heavily discounted during the days preceding Black Friday, so the pressure on the shares of this company isn’t as high as in the case of Walmart and if the data that will come in after the first week of discounts, i.e. Black Week, proves beneficial due to consumer spending, then it’s Target that will have a chance for a higher increase in the share price – comments the XTB expert. – At the same time, both these companies could potentially see a better increase in share price than the entire retail sector because Walmart had already shown better results.
This season, after Black Friday, one should not expect fireworks, and the stock results of retailers suggest that the market hasn’t been nurturing high expectations towards November-Christmas sales in the recent weeks.
In Poland in 2024, we observe significant cooling of moods, and this trend is confirmed in mostly weaker financial results of Polish retail companies and related sectors. In the recent months, we observe an acceleration of inflation, and higher energy prices make consumers even more uncertain of tomorrow. As a result, the trend of postponing expenses dominates. On the eve of Black Friday, signs of optimism are hard to find.
– Importantly, when we get the results after Black Friday, we’ll know much more about consumer sentiments, especially given that expenses made then are not focused on essential goods – summarizes Tymoteusz Turski from XTB. – The forecasts for the USA are such that the spending per consumer will reach 902 USD and will be the highest in a decade.
Source: https://managerplus.pl/akcje-detalistow-i-black-friday-czy-spowolnienie-gospodarcze-odbije-sie-na-wynikach-82658
