Retailers Drop a Black Friday Bomb

Black Friday looked a bit on the gray side this year. Although shoppers dutifully showed up in stores, they actually spent less than they did last year.

According to the National Retail Federation, which uses a survey of 5,000 consumers to help it compile data, 13% more shoppers flooded stores on Black Friday this year compared to last. But on average, they each spent about 8% less -- $343.31 versus $372.57.

For the entire four-day shopping weekend, however, the NRF estimated that sales rose just a teensy bit, to $41.2 billion from last year's even $41 billion last year. That’s not exactly heartening news for anyone who believed that pre-Black Friday paranoia was overrated.

On a brighter note, researcher comScore said online shopping sales increased 11% on Black Friday (to $595 million), and 10% on Thanksgiving Day (to $318 million). That could be very good news for online retailers, particularly Internet superstore Amazon.com (Nasdaq: AMZN  ) . The e-tailing giant is already crowing that November marked a new monthly sales record for its Kindle.   

A holly, not-so-jolly Christmas?
Black Friday's overall poor performance proves that even if consumers aren’t as terrified as they were in the midst of economic crisis mode last year, many simply can’t spend much money now. High unemployment, falling real estate prices, and snipped credit lines (or the need to pare down debt) all create serious, even severe, budget constraints for many people. Add in the overall uncertainty plaguing even many employed people, and a healthy holiday shopping season seems an increasingly distant possibility.

To get shoppers jazzed, retailers have resorted to dramatic price cuts. One survey last week showed that a significant majority of consumers would balk at buying if they didn't see half-off prices. On my CAPS blog post on the Black Friday topic, several Fools pointed out that retailers' inventory controls, while important in a recessionary climate, may work against them if they don’t plan appropriately; consumers who are willing to spend can't buy an item if they can't find it on the shelves.

A majority of Foolish readers got it right last week, when polled about the prospect of a bleaker Black Friday and holiday shopping season. Roughly 63% of Foolish respondents predicted that retailers will get coal in their stockings this year as shoppers hold out for dirt cheap discounts.

Check your list twice for what stocks will be naughty or nice…
The bloody battle for holiday bucks will make things very difficult for the retail sector. Highly indebted companies such as Borders (NYSE: BGP  ) and Talbots will have a tremendously hard time. Some consumer-goods companies will likely struggle, too. How hot could Crocs (Nasdaq: CROX  ) possibly be this holiday season? I'm doubtful its products will even be lukewarm.

On the other hand, retailers with plenty of cash, negligible debt, and a history of strong sales even during this period of economic malaise sound like keepers to me. I think stocks like Buckle (NYSE: BKE  ) and Aeropostale (NYSE: ARO  ) still fit that bill. Other options include Wal-Mart Stores (NYSE: WMT  ) and Costco (Nasdaq: COST  ) . Both are all about the discounts, and they seem safe for cautious, long-term investors. Indeed, notably wary value hound Warren Buffett  just picked up shares of Wal-Mart.

At this juncture, retail sales for the holiday season still have a glimmer of hope, but it seems safe to say that many of these companies won't have happy holidays. Choose your retail stocks wisely.

Amazon.com and Costco are Motley Fool Stock Advisor recommendations. Costco and Wal-Mart are Inside Value selections. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 30, 2009, at 4:08 PM, catoismymotor wrote:

    Profit margins have been slashed and unemployment is up. CC companies have hurt themselves making running up the charge account more and more a relic of the past. Today cash is king and the purse strings are tight. This holiday season is all about value not frivolity.

  • Report this Comment On December 02, 2009, at 10:08 AM, jayan25 wrote:

    Look for an Internet forum to be up and running so that employees of Borders can post their resumes on a national basis.

  • Report this Comment On December 02, 2009, at 10:16 AM, jayan25 wrote:

    also look for an announcement from 2-3 major publishers that they are suspending shipments to Borders

  • Report this Comment On December 02, 2009, at 10:21 AM, wolfhounds wrote:

    I did my share of shopping on Amazon, but not before comparing prices with other online outlets and total costs. This would include taxes and shipping. Amazon wasn't always my choice on that basis. I think many shoppers are doing the same, and that might account for some incredible bargains I got. It will be interesting to see how these record sales translate into profit margins.

  • Report this Comment On December 03, 2009, at 8:35 AM, jayan25 wrote:

    The word on the Business street is that BGI will file for Bankruptcy by the end of their fiscal year.

    Full disclosure:

    I own no stock nor have I shorted this stock. I also know of no brokers that own or have shorted this stock.

  • Report this Comment On December 03, 2009, at 8:55 AM, jayan25 wrote:

    Correction: BGP not BGI

  • Report this Comment On December 03, 2009, at 10:20 AM, jayan25 wrote:

    Advice of analysis- BGP can not sustain debt load. Sell recommendation.

  • Report this Comment On December 03, 2009, at 12:19 PM, jayan25 wrote:

    BGP Insiders buying stock to try and up price. Possible SEC investigation.

  • Report this Comment On December 04, 2009, at 7:14 AM, jayan25 wrote:

    4 contributing factors to the fall of BGP can be found in the fall of Borders UK"

    !) Loss of core identity- bookseller. today no one knows what BGP stands for in Business.

    2) "Borders has been critizised by staff, publishers and analysts for selling the likes of jewellery boxes."- This applies to not only Border UK but also BGP.

    3) ""Borders was a well recognised name in the UK but never managed to get into our hearts"- This is also a problem for BGP as in the UK.

    4) "If you haven't a reliable bedrock of books that will sell at full price, you can't sustain a business by heavily discounting the frontlist."- This has increasingly been a problem for BGP. BGP use to have one of the best backlists in the industry. Not anymore. That is way they are offering the promotions that they are. B&N and Amazon have a much deeper backlist than BGP.

    All these factors plus possible insider trading issues will force BGP into the same situation as BorderUK- Bankruptcy.

  • Report this Comment On December 06, 2009, at 12:55 AM, jayan25 wrote:

    BGP to not only close hundreds Of Walden book stores but also close 100 or more Borders stores before entering bankruptcy. Bankruptcy will be chapter 7

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