By Sunday evening, Black Friday was but a distant memory for most consumers, but not for companies involved in the frenzy.
The holiday season start has been a true mixed bag. On the one hand, I personally watched people argue with another over the last door-buster TV inside a Best Buy (BBY) around midnight on Thanksgiving. What a sight. Apparently I wasn't the only spectator to intense arguments. Wal-Mart (WMT) had a disastrous hit to its already dismal public image as several fight videos went viral. I saw people return to their savage shopping ways on Black Friday (which I think is a positive economic indicator, people just digging through tables without considering the purchase price), destroying sweater tables at Old Navy and Macy's (M). But just like that, by Saturday the malls and discount stores were dead as a doornail.
Walking around Best Buy and Target (TGT) stores on Saturday yielded new clearance tables for certain items at the former and unsold door busters at the latter. The scene at the malls Saturday night weren't much different. It felt like a typical Saturday with teens wandering with heads in their phones and old people going for a walk. As for Sunday, well, in the number of stores I visited people were going about their merry business of grocery shopping for the week ahead. The deals were less savory at discount stores, but oddly more savory at Macy's. As I said, a true mixed bag where saying that online shopping is crushing Black Friday weekend would be a gross oversimplification.
What was encouraging in my eyes was that people were acting differently relative to last year.
- Clearly there was some good charge card spending going on. The amount of big screen TVs priced more than $500 sold was strong.
- People were self-gifting, a holiday season shopping tradition that has become less so in the pos-recession world.
- There was more savviness in how people shopped stores, digging through clothing piles for the right style instead of the right price and buying the higher priced sections in department stores.
Despite the positive indicators, one comment stuck with me while on a media briefing with the National Retail Federation (NRF) Sunday evening. NRF CEO Matt Shay said "there were some great deals to be had." Shay is dead on. There were a host of amazing deals to be had because some merchandise was not moving (or hasn't moved this month) due to warm weather or new competitive forces. And for those vendors offering the best deals by Sunday evening, best believe their holiday season is going to be a long slog to ensure products are moved and communications teams cleverly prepare bad news for investors in February 2016.
Here are three less-than-obvious losers from the holiday shopping start.
"We believe we're approaching the holidays with a strong product line up, priced appropriately and backed by a world-class global marketing campaign," said GoPro's Nick Woodman on an Oct. 28 earnings call. Sure, the products are priced appropriately only after they are marked down because nobody is buying. Right off the bat on Thanksgiving I observed GoPro merchandise not selling at Best Buy. I checked a few other locations, and products were not moving. By Saturday, GoPro items at a couple Best Buy locations were on a newly-formed clearance table. A clearance table for GoPro, the once super premium camera maker.
Having seen this, I think it's important to keep in mind this comment from the company's CFO on the same call.
"We were building inventory for the upcoming holiday season, so lighter than anticipated demand resulted in inventory turns that were below our target levels," GoPro CFO Jack Lazar said. I think GoPro shipped too much inventory to retailers despite products being met with slower-than-anticipated demand going into the holidays. In other words, the company remained stubborn, failing to appreciate the new sales run rate in the business. I would be very concerned on GoPro's holiday season numbers. Drones are coming with cameras now, which in my view is stealing some sales. Further, there are a number of new tech gadgets in the market this year that will be the big gift for people for the season (ahem, Apple Watch).
Finish Line (FINL)
Something in me wants to say Finish Line shares are cheap. At a forward PE multiple of 8.9x and 4x trailing EV/EBITDA, the stock is trading well below Foot Locker's (FL) comparable sales and the broader specialty retail sector. In part that is deserved as the company has been out-executed by Foot Locker. As for the start of the holiday season, I wondered during frequent trips to malls where the traffic to Finish Line stores was. It never seemed to show up. Where it did show up, at least for Thanksgiving and Black Friday, was Foot Locker. By Sunday, Finish Line had red signs in the store offering discounts that didn't exist a couple days earlier, which is a surefire signal sales did not materialize as expected.
I think the retailer has started very slowly and the stock could become cheaper.
Don't get me wrong, TJ Maxx is going to get some amazing buys on winter apparel due to the overstock situation out there at the moment. But, over the past four days one thing has surfaced: on-the-mall department stores such as J.C. Penney (JCP) and Macy's have proven to be big winners. Now, I am not too sure how their profits for the quarter will look given their fierce discounting. But the traditional department stores have come out very competitive on price to start holiday shopping and have strong assortments, which makes a person forego a trip to Marshalls or TJ Maxx. I think dollars spent at J.C. Penney and Macy's came right out of the pocket of TJ Maxx (and fellow off-mall department store Kohl's (KSS)). Also note that many malls have been renovated in the past two years to include expanded dining options and better shopping experiences. I think consumers are returning to the mall as it has become a one-stop shopping destination again.