I ultimately gave in, venturing out with immediate and extended family to participate in Black Friday. Since it was later in the day, I figured that the crowds would have dissipated; but how wrong I was. It was difficult enough to find a parking space, and the crowds were huge at the Western Pennsylvania Outlet center. By the way, this is the same venue where the seeds to take a position in Fossil (FOSL) were planted after Christmas last year.
While I realize that the actual significance of Black Friday in terms of sales volume is no longer what it once was due to Cyber Monday, if what I witnessed was any indicator, this could be a huge holiday retail season.
Thankfully, there were no Walmart-like (WMT) free for all's, and I witnessed pushing or shoving; however, it was difficult to get around some of the stores as the shoppers were really packed in. The most interesting part of this excursion was to observe which stores had lines of customers waiting to get in; keep in mind, by this time, it was mid-afternoon.
The biggest surprise was the line outside of L Brand's (LB) Bath and Body Works. While it was not as long as some other stores', I don't believe I'd previously witnessed throngs of customers actually waiting to get in. LB has had a very rough run in recent shares, and shares are down more than 45% year to date. The company recently cut fourth quarter guidance, and halved the quarterly dividend to 30 cents/share. LB currently trades at 11 X next year's consensus estimates, and yields 4%. (Once again, be careful about the dividend yield; some are still reporting the trailing dividend at 8+%, which does not reflect the cut).
The longest line we witnessed was outside the Nike (NKE) store; now that was a line. I asked my college age son why he thought folks would wait so long to get in, and he simply said "Nike is going to take over the world", whatever that means. Interestingly, there were no lines outside the Under Armour (UAA) store.
There were also significant lines outside Michael Kors (KORS) , a name which has endured a 40% shellacking since August. KORS currently trades at about 8.5 X next year's consensus earnings estimates. While not a name I am all that familiar with, it may be time to do a deeper dive.
The most pleasant surprise was Vera Bradley (VRA) , which, if the line outside the store, or purchases by family members was any indication, may be regaining some of its former glory. It was less than two years ago that I stumbled onto VRA. While it seemed cheap at the time, it also seemed to have lost its luster among the target audience in our household. It's been a wild ride since; after doubling between last November and this past September, shares have fallen 35%. Currently trading at 17 X next year's consensus earnings estimates which is not exactly cheap, the company's solid balance sheet compensates. VRA boasts about $4.10 per share in cash and investments and no debt, and trades at just over 2 X net current asset value.
We'll have to wait and see if these observances, given the tiny sample size, are indicative of the whole, and actually translate into revenue and earnings.
