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5 Things to Know About Black Friday

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Black Friday is the Super Bowl for retailers. It's the start of the all-important holiday shopping season. Few people realize where the name Black Friday came about and how this date came to be the most important shopping day of the year. Here are a few facts about Black Friday that every Fool should know.

1. The shopping bonanza dates back to the early 1900s
The tradition of shopping after Thanksgiving started in the early 1900s. It came about because the highlight of the annual Thanksgiving Day Parade was Santa Claus showing up at the end of the parade. Major department stores like Macy's (NYSE: M  ) waited until the end of the parade to start promoting their Christmas specials.

Macy's annual Thanksgiving Day parade was started in 1924 and is the second-oldest such event in the U.S. after America's Thanksgiving Parade in Detroit. Back then, department stores followed an unwritten rule that no advertising for Christmas would be done until after the parade was finished. For Macy's, by sponsoring the parade, it got a head start on its competition by having its name advertised throughout the parade.

2. Retailers always wanted a longer holiday shopping season
Most retailers always wanted a longer shopping season and didn't care for the unwritten rule, but no retailer wanted to be the first to break tradition. Retailers sought to get the official Thanksgiving Day changed from Nov. 30 to a week earlier. In 1939, President Franklin Delano Roosevelt wanted to help the retailers and moved the date a week earlier. The change did not go over well with the American public as the announcement came in October and many had already made their plans. In 1941, Congress made Thanksgiving officially the fourth Thursday in November.

3. The term Black Friday originated in Philadelphia
The term originated in Philadelphia in 1961. The term was used to describe the mass of pedestrians and automobiles that would be found in the Center City District of Philadelphia the day after Thanksgiving. Police officers would refer to the day after Thanksgiving as Black Friday because of having to deal with traffic jams and the throngs of people flooding the streets of Philadelphia. For the police officers of Philadelphia, Black Friday was not meant as a term of endearment. It wasn't until after 1975 that the term was used outside of Philadelphia.

Later, the term Black Friday meant that retailers would go into the "black" or become profitable. Typically, retailers would post losses for most of the year and would make all their profits after Thanksgiving and during the holiday shopping season. For a retailer like Wal-Mart Stores  (NYSE: WMT  ) that is profitable all year, the holiday season is a time to further boost profits.

4. Black Friday wasn't always the busiest shopping day of the year
From 1993 to 2001, Black Friday wasn't even in the top five of the busiest shopping days of the year. The Saturday before Christmas typically was the busiest day of the year. Since 2005, however, it has been the busiest shopping day of the year due to the strong advertising put forth by retailers. The battle among stores to open earlier and earlier has also helped drive interest in Black Friday as a national shopping day.

5. This year's Black Friday
This year most Macy's stores are opening at 8 p.m. on Thanksgiving Day. This is a first for Macy's and follows the pattern of many retailers of opening earlier and earlier. The retailer is going to be offering door-busters and morning specials. Macy's strategy is to localize its stores and offer specials catering to customers in a specific region. This allows Macy's to offer specials on winter coats in New York, but not in Florida. To advertise its specials, Macy's hired the music group One Direction to star in a commercial promoting Black Friday and shopping at Macy's.
The most aggressive Black Friday retailer this year looks to be Wal-Mart. Wal-Mart launched an early bird Black Friday sales event on Nov. 22 at both of its stores and online.

Wal-Mart also agreed to match Black Friday offers from Target, Toys R' Us, and Best Buy. Wal-Mart's official Black Friday will kick off at 6 p.m. on Thanksgiving Day. The retailer plans to offer 21 one-hour guarantee "Manager Specials" for shoppers. Online shoppers can shop for Black Friday specials early Thanksgiving morning.

Foolish assessment
Expectations are high for retailers this holiday season. It certainly looks to be competitive and two retailers to keep an eye on are Macy's and Wal-Mart. Macy's has momentum heading into this holiday season after posting a 3.5% rise in comparable-store sales in the third quarter. Wal-Mart, on the other hand, posted a comparable sales decline of 0.3% in the third quarter. Wal-Mart is counting on this holiday season to turn things around.

Both companies continue to return money to shareholders in the form of dividends and repurchases. Wal-Mart has a dividend yield of 2.4% and Macy's yield is 2%. Year-to-date, Macy's has repurchased $1.2 billion worth of shares while Wal-Mart repurchased $1.7 billion in shares in the third quarter alone. I see both companies continuing to repurchase shares and reward shareholders. A strong holiday season would be an added bonus to end the year for both retailers. 

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5/24/2016 4:02 PM
M $31.19 Down -0.10 -0.32%
Macy's, Inc. CAPS Rating: **
WMT $70.24 Up +0.74 +1.06%
Wal-Mart Stores CAPS Rating: ***