The National Retail Federation (NRF) expects U.S. holiday retail sales in November and December -- excluding auto, gas, and restaurant sales -- torise up to 4.2% to $730.7 billion this year. Within those two months, the Thanksgiving shopping weekend -- which spans from Black Friday to Cyber Monday -- should attract the most shoppers.
The NRF and Prosper Insights & Analytics expect 165.3 million consumers to shop that weekend, either offline or online. Roughly 115 million of those shoppers plan to buy products on Black Friday, making it a crucial day for big retailers and their investors.
Let's take a look at three big retailers that are gearing up for big Black Friday sales, and why their stocks might make big moves after the shopping holiday.
Amazon (NASDAQ:AMZN) claimed 49% of the U.S. e-commerce market last year, according to eMarketer, making it one of the top destinations for Black Friday shoppers. NRF's survey also found that 41% of shoppers plan to start their holiday shopping online.
That's why Amazon recently stretched its Thanksgiving shopping weekend into a full week, from Nov. 22 to Nov. 29, with "one-time" deals on Thanksgiving, Black Friday, and Cyber Monday. It's offering big discounts on first-party products like Echo speakers, Fire TV devices, private-label apparel, and Amazon Basics and Amazon Essentials products.
Selling these products at lower margins (or even losses) widens Amazon's digital ecosystem and moat against other retailers. Amazon also offers big discounts on those products on its annual Prime Day sale every July, which is gradually catching up to Black Friday in significance. A recent survey by Decluttr found that 5% of Americans planned to do most of their shopping on Prime Day this year, compared to 20% on Black Friday.
Amazon disappointed investors last quarter with a light holiday sales forecast for 11%-20% annual revenue growth for the fourth quarter. Therefore, investors should keep an eye out for any follow-up reports on Amazon's Thanksgiving weekend sales, which could either lift or sink the stock towards the end of the year.
Amazon struggled this year, but its rival Target (NYSE:TGT) nearly doubled its market value as its digital sales surged, comparable store sales rose, and its margins expanded. Target's digital sales soared 31% annually last quarter and accounted for 7.5% of its top line, and it expects its full-year comps to rise 4%.
Target is finally reaping the benefits of a multi-year expansion of its e-commerce and delivery ecosystem (which includes its Order Pick Up, Drive Up, and Shipt services), the renovation of its stores, the introduction of less capital-intensive small-format stores, and the introduction of more private label brands -- and it expects that momentum to continue in the holiday quarter.
Target's Thanksgiving weekend sales will start on Thanksgiving Day and last through Cyber Monday, but it offered a two-day Black Friday "preview" sale earlier this month. It's also offering early access to select Black Friday deals to its REDcard and Target Circle members before the shopping holiday kicks off.
During Target's last conference call, CEO Brian Cornell stated that Circle was already "America's fastest growing loyalty program" with over 35 million members and that its growth would lift its fourth-quarter sales. Target has been firing on all cylinders over the past year, and a strong holiday quarter could propel the stock to fresh highs.
Amazon and Target will both likely gain more shoppers during the holidays, but that growth could come at the expense of Macy's (NYSE:M), which lost half its market value this year as its comps growth decelerated and its margins contracted.
Macy's comps fell 3.5% on an owned-plus-licensed basis last quarter, marking its first quarter of negative comps in over two years. Its gross and operating margins both contracted annually due to markdowns. The company blamed cold weather, weak tourism, sluggish mall traffic, and e-commerce hiccups for those dismal results, but didn't offer any viable plans for a long-term turnaround.
Macy's recently launched an "early" Black Friday sale with discounts of up to 70% on over 25,000 items in a bid to gain ground against Amazon, Target, and its other rivals. Those markdowns might bring back some shoppers, but Macy's still expects its comps to slip 1%-1.5% for the full year, and for its adjusted earnings to tumble 34%-39%.
Investors shouldn't consider Macy's a value play right now, even though it trades at just six times forward earnings with a forward yield of 10%. Instead, they should consider it a canary in the coal mine for other mall-based retailers.