It's hard to believe the much-dreaded (for me anyway) Black Friday is on the horizon. A trip to the outlets in western Pennsylvania several years ago while at my in-laws' for Thanksgiving cured me of Black Friday participation, perhaps for good. Traffic on the highway was at a standstill several miles from the outlet exit. We turned around; that was enough for me.
Still, what happens on Black Friday can have a huge impact on the holiday retail season, and there are a couple of names that pique my interest this year. Both have seen better days; I'm not going to say this holiday shopping season will make or break either of them, but it could be a harbinger of their near-term futures.
Perhaps not surprisingly, Fitbit (FIT) is one of those names. It's a former growth name that now has value overtones and is trading at just 2.33 times net current asset value, and has nearly half of its market cap in cash and short-term investments. I won't be watching potential sales of its traditional Fitbit wearable devices. Frankly, that ship has already sailed. Several members of my immediate and extended family own and love those, but the market has grown increasingly competitive. In fact, my eldest daughter, proud and extensive Fitbit user, just purchased a competitor's product for my wife's birthday.
What will make or break Fitbit's quarter and prod investors toward, or away from, the name will be sales of the company's new Ionic smartwatch. Reviews have been decent overall (it reportedly has a four-day-plus battery life), but it is going head to head with the Apple (AAPL) Watch Series 3. For fitness purposes, the Ionic appears to be the winner, but Apple is usually difficult to displace. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
Judging by the stock price, little is expected from FIT, and we'll see if Black Friday shopping can provide some early evidence for the season. Fitbit product activity on Amazon (AMZN) will tell at least part of the tale; the company's Ionic and Blaze models are the top two best-selling smartwatches at AMZN.
The other name I'll be watching is struggling toy company Mattel (MAT) , whose shares have fallen nearly 60% over the past year. Third-quarter results were well below expectations; it was an ugly quarter. Reported earnings per share of 9 cents badly missed the 57-cent consensus. Revenue of $1.56 billion was off target by $260 million. As a result, the company suspended its quarterly 15-cent dividend, which sent a seemingly bad message to investors.
Success or failure in the toy industry comes at the whims and desires of children. Iconic brand American Girl sales were down 30% to $88 million vs. the same quarter last year. While this represented less than 6% of sales, it shows what can happen to even the most popular (at one time anyway) of brands.
What can right Mattel's ship? For one, a good showing in the fourth quarter, and putting some toys on the shelves this year that draw kids back to the brand. To that end, there are evidently a handful of newer items that should be on the shelves this season, including Hologram Barbie, Justice League Batmobile, Hot Wheels Ultimate Garage Playset and Kamigami Robots, that may help tell the tale.
Ultimately, MAT could be a takeover target; activist Southeastern Asset Management just reported a 10.25% stake in the name. It is an extremely well-known brand, whose stumbles have put its enterprise value (market cap plus debt minus cash) at about $7.2 billion. Debt is heftier than I'd like to see at nearly $2.9 billion.
While I have not had a position in MAT for several years, it is squarely back on my radar.
