The day after Thanksgiving is typically sluggish on Wall Street, as market participants either recover from their Turkey Day-induced slumbers or head out to take advantage of Black Friday sales. Yet this year is different, with the COVID-19 pandemic continuing to wreak havoc and disrupting the traditional shopping patterns of millions of Americans.
That doesn't mean you should count retail companies out, though. The best players are finding ways to capitalize on shifting consumer preferences and are thriving. Below, I'll look at two of the biggest Black Friday winners on the stock market and what they're doing right.
How markets fared Friday morning
Stock markets were broadly higher, remaining at or near record-high levels. As of 12:15 p.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was higher by 11 points to 29,883. The S&P 500 (SNPINDEX:^GSPC) picked up 6 points to 3,635, and the Nasdaq Composite (NASDAQINDEX:^IXIC) vaulted upward by 101 points to 12,195, a new record.
The holidays are a traditionally strong period for the stock market, but a lot depends on how the holiday shopping season goes. As a sign of economic strength or weakness, what happens in retail has implications across the stock market.
Big gainers extend their streaks
Two of the best performers in the retail sector were Wayfair (NYSE:W) and Etsy (NASDAQ:ETSY). That shouldn't come as any huge surprise to those who've followed those stocks, as both have seen their share prices more than triple in the past year. Indeed, just in 2020, Wayfair is up 190%, while Etsy has topped the 255% mark with its year-to-date gains.
In a coronavirus-dominated landscape, shoppers have shown that they're embracing the convenience and safety of the internet more than ever. Etsy and Wayfair benefited from greater consumer adoption of e-commerce long before anyone had to deal with a pandemic, but COVID-19 has upped the stakes and driven interest even in areas where e-commerce faced some struggles to achieve momentum.
Wayfair is standing on its own
In particular, Wayfair, whose stock was higher by 4% at the time of writing, took a while to warm up to the e-commerce craze. Furniture and other large home goods are particularly cumbersome to ship, boosting the cost of getting goods to customers. Moreover, many believed that shoppers wouldn't be willing to buy furniture online, as it took away the opportunity to see and touch items before having them shipped to their homes.
Earlier this year, though, the closure of most brick-and-mortar stores left shoppers without much choice, and Wayfair took advantage. Federal government stimulus checks also gave Wayfair a boost.
Yet even once the economy started to reopen, Wayfair kept swinging for the fences. In its most recent quarter, the online furniture seller posted 67% revenue growth year over year, reversing a year-ago loss with a big profit. Shoppers flooded in even without massive marketing and advertising expenses, and Wayfair said it believes the holiday season will be more lucrative than ever.
Etsy makes good on its potential
Etsy shares were up 10%, building on its past momentum. The online marketplace specializes in handmade goods and crafts, and the platform has been a lifesaver for sellers even as it becomes more relevant for holiday shoppers.
With many people stuck at home and having lost their job, working from home has become a necessity, sending more sellers to Etsy. At the same time, Etsy has seen huge demand among customers, with active buyers having jumped by 15 million users in the past 12 months. With plenty of scalable growth left, Etsy is in a great position to benefit from its rising popularity.
The holiday shopping season might not look like it usually does for retail stocks, but people still want to buy things. As long as that's the case, Etsy and Wayfair should be in a good position to serve their customers.