On the macro front, we have seen one constant throughout 2011: The consumer has shown surprising resilience by continuing to spend despite being presented with reasons not to spend. Earlier in the year, there was a spike in gasoline prices that could have seriously derailed consumer spending -- but it didn't.
When inflation on fresh food and consumables hit everywhere from Costco (COST) to Dollar Tree (DLTR), the consumer managed to navigate the pricier trips through the store aisles. Then, in the summer, the debt-ceiling debacle sent consumer confidence plunging along with the stock market. Still, consumers did not sharply reign in their spending -- as the responses given to survey takers implied they would.
This year's with Black Friday may follow the country's Black Eye Wednesday if the Super Committee fails to meet lowered expectations on a debt reduction deal. I think consumers are prepared to surprise once more in terms of their spending -- if for no other reasons than that the malls are inviting them in earlier on Black Friday, a greater quantity of goods at inflationary prices are being moved, and there is increased cohesion between online and brick-and-mortar prices to keep the consumer engaged from the beginning to the end of the shopping weekend. Plus consumers will likely continue this year's pattern of exceeding reasonable spending expectations by dipping into their savings and putting a balance on the credit card.
When Black Friday is officially over, the sales growth numbers that will hit on Sunday evening are likely to be slower than in 2010, which indicated a full-blown release of pent-up demand. Still, there already are indications that the traffic will be quite robust on a year-over-year basis. And, with the markets very short-term focused, as long as the sales taillies are ahead of estimates, we will probably see a positive reaction inside the cyclical complex that was thumped last week on macro concerns and so-so outlooks from major retailers.
Every Cyber Monday I wonder how I managed not to see some particular company doing well/poorly and its stock acting accordingly. It's classic Monday morning quarterbacking. This time around, rather than be reactionary, I have come up with a short-term thesis that is based on the clues being presented. First, many malls are being opened earlier, but not all. Second, many high-end stores are not opening earlier. And third, consumers, whether they agree with the retailer's practices or not, are likely to respond to earlier store/mall openings.
The trades on my radar screen are property owner Macerich (MAC) and convenience store operator Casey's General Store (CASY). I am not particularly enthralled with each company's fundamentals (or the valuation on Macerich), but am I consider both of them to be sentiment plays. Macerich has its hands all over the early mall opening scene and has more Middle American tenants than Simon Property Group (SPG). If the Black Friday weekend unfolds as I am bracing for, the Street's recently cut sales and earnings estimates on Macerich may appear a too conservative, thereby supporting a needed bump in the stock. As for Casey's, its convenience stores will be a good destination for a quick post-holiday snack or energy drink before the trip to the mall. Moreover, the valuation on the stock is not stretched, and like Macerich, it has outperformed the market in November, which is an interesting feat.