Pictures say a thousand words, especially when it comes to assessing retailers.
And with a mere hours before Black Friday kicks into high gear, some retailers are already telling Wall Street they are scared about how the holiday season will pan out. For this crop of retailers, there are distinct reasons why they may be offering eye-opening pre-Black Friday sales or stocking discounted items near the lucrative front of the store. Some of those reasons include:
- Styles are boring and people aren't buying.
- Styles are not that boring, but the prices are too darn high, so people aren't buying.
- The year has been chock full of disappointment, so it is time to blow out inventory and focus on 2016.
- The consumer is not responding to discounts as they have in the past, so might as well discount the entire store and see what happens.
- Online businesses are outperforming bricks and mortar in terms of sales and all stops have to be pulled out to lure consumers that are in the stores... and hope they are tempted to add an extra item to the basket. The money from that that extra item will, of course, get plowed back into the online business.
I took to the malls and discount retailers on Tuesday to prepare for TheStreet's Black Friday coverage. In addition to running a live blog on TheStreet's homepage starting tomorrow morning (I will be doing a marathon session, up from 6am on Thanksgiving at Kmart to Black Friday evening), we have a host of executive interviews planned and one-off feature pieces. I encourage you to tune in and engage with me on Twitter, @BrianSozzi, if you are in stores over the next four days and would like to share your photos, Vines, or any interesting anecdotes. Here are some photos I snapped in my tours on Tuesday, which I think are very telling about the state of retail going into the holidays.
The Gap (GPS)
In my view, Gap will be one of the retailers that attempts to completely blow out their seasonal inventory over the next month -- at the expense of delivering a richly profitable holiday quarter. The company has given up on 2015, I don't care what they say to the contrary. Fashion misses are all over the sales floor, and so are the pre-Black Friday sales. Gap was offering 40% off the entire store yesterday, and 50% off the entire store at Old Navy. I can only imagine what the discounts will look like on Black Friday.
By Saturday, if discounts like this are still in effect, and inventory is as high as it is currently, I would say Gap has started the holiday season on a bad foot. A bad foot for Gap is one where it raises the potential of falling short of fourth quarter guidance that was already on the disappointing side.
Notably, the department stores are loaded with discounted Michael Kors handbags. Moreover, the styling on the new stuff is, in my opinion, absolutely dreadful -- I would not be long this name.
Ideally, Gap would only be offering 40% off certain items before Black Friday, not the entire store.
Deckers Outdoor (DECK)
The discounts on boots have picked up over the last week, especially for Uggs from Deckers Outdoor. I think the company was way too optimistic on its holiday season guidance -- listening to the earnings call, it sounded as if GDP was running at 5% annualized and we were getting hit with major snowstorms, sending people off to buy sheepskin boots. In addition to the strong discounts on Uggs, I believe Deckers is seeing intense competition from Columbia Sportswear's (COLM) Sorel line: it has received good placement at retailers and the styling is very impressive.
Shares of Deckers Outdoor have lagged the broader market, this month, and I expect that to continue throughout the holiday season unless we get a series of major snowstorms that put a temporary halt to the discounting.
A 30% discount on a product Deckers Outdoor suggested would be in demand this quarter.
Disney (DIS)
The mall has been taken over by Star Wars products. J.C. Penney has plush Star Wars dolls scattered about the women's apparel section. There are Star Wars bears at Build-A-Bear (so cute). And at a visit to Bloomingdales, there was a pricey, Brooklyn hipster friendly Star Wars collection in a prime spot by the cosmetics section. I have been surprised by how much Star Wars stuff is out there; Disney did one heck of a job marketing the name along new avenues -- beyond just toys.
Disney's shares have been acting well since late September -- if you are long, stay long. If you aren't long, get long. The company could be sitting on two blowout quarters thanks to all things Star Wars, including the movie launch on December 18.
What hipster would not want a tight-fitting Star Wars sweater from Bloomingdales after spending $200 at Whole Foods?
Source for images: Brian Sozzi
