The global economy has not entered a recession, and consumers in recent years, not only in Poland but also in Europe and the United States, have proven surprisingly resilient to inflation, increasing spending. However, this growth has become increasingly selective. The need to rebuild savings, coupled with uncertainty surrounding the trajectory of inflation and energy prices, is prompting millions of households to manage their budgets more cautiously and focus on rebuilding financial reserves.
Will positive trends in wage growth and ‘solid’ consumer sentiment on both sides of the Atlantic translate into a successful November and record Black Friday sales for retailers? Or will ‘Black Week’ turn out to be a disappointment? Above all, what reaction can we expect from the stock market?
Retail stocks over the past decade have outperformed the S&P 500, with investor activity typically increasing about two weeks before Black Friday. However, this year, the difference, still in favor of the retail sector, has slightly diminished. Source: XTB Research
Looking at consumer sentiment in Europe and the United States, a significant improvement is evident compared to the turn of 2022 and 2023, when pessimism about the state of the global economy was at record levels. This, combined with a potentially weak Black Friday, could lead to disappointment and further the discussion on changes in consumer trends, their market impact, or even the potential reversal of the ‘optimistic trend.’
Cooling Sentiment in Poland
In Poland in 2024, we observe a significant cooling of sentiment, confirmed by weaker performance in the shares of Polish retail companies and related sectors. Recent months have seen accelerated inflation, and higher energy prices make consumers even more uncertain about the future. Consequently, there is a prevailing trend of postponing expenditures. On the eve of Black Friday, signs of optimism are hard to find.
Will record ‘seasonal’ promotions this year pass unnoticed? Or are consumers readying themselves for sales of overstocked inventories amassed by certain companies?
Challenges Ahead for Retailers
The retail industry acts as a frontline sector, among the first to feel either consumer weakness or a sudden surge in their activity. Thanks to the automation of systems and datasets, large networks can quickly adjust prices to match demand. Falling inflation has indeed led to reduced pricing power and limited opportunities for margin expansion. Consumer patterns are not constant, and real wage growth does not always align with an equivalent increase in purchases.
This year’s Black Friday will be a critical indicator of global consumption strength and the ‘need’ for spending in major Western markets.
The Rise of E-Commerce
The growing popularity of online sales intensifies pressure on e-commerce offers, likely reducing in-store promotions. Convenience and cost-effectiveness could direct consumers toward online orders. However, this shift does not unambiguously benefit the retail sector, as it could increase margin pressure due to higher fulfillment costs.
Interest rates are taking their toll. Weak retail stock performance, which historically has been strong leading up to Black Friday, raises concerns about consumer activity and sales outcomes during this period.
Summary
Historically, Black Friday has often been an ‘opportunity’ for profit-taking. While retail stocks have shown strong gains in the two weeks before the promotional peak, most saw declines after Black Friday.
In 2024, with persistently challenging conditions for both Polish and global retail sectors, fireworks are unlikely this Black Friday. Retail stocks suggest that the market has not built up high expectations for November-December sales.
Author: Eryk Szmyd, XTB Analyst
Source: https://ceo.com.pl/czy-to-bedzie-najslabszy-black-friday-od-lat-czarny-piatek-rozczaruje-detalistow-72164
