Perhaps the biggest unknown for the retail sector this holiday season is how much inflation will impact consumer spending. Black Friday — so named because it was historically the first day stores would push into year-to-date profitability — will provide an important test.
Among those in the spotlight is Target Corporation (NYSE:TGT), shares of which took a 12% hit last week when the company lowered its fourth quarter guidance, “based on softening sales and profit trends that emerged late in the third quarter and persisted into November.”
Conversely, Best Buy Co Inc (NYSE:BBY) beat raised its full-year guidance for sales, expecting a boost from Black Friday, Cyber Monday and the two weeks prior to Christmas.
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Inflationary pressures aside, a record number of people are expected to shop on Black Friday, some 166.3 million according to a survey from the National Retail Federation and Prosper Insights & Analytics. That’s 8 million more than in 2021.
The question is how much they will spend and how judicious they will be in searching for the lowest price. Consumer discretionary stocks, which refers to companies that rely on spending retail, restaurants and vacations, are down 32% year to date, according to reports. That’s far worse than the S&P 500 broadly, which is down 15.5%.
“People are willing to wait and be patient,” said Rob Garf, vice president and general manager of retail for Salesforce, a software company that also tracks shopping trends, as reported by CNBC. “The game of discount chicken is back, and consumers will ultimately win.”
There is also the presence of Amazon.com Inc (NASDAQ:AMZN) to contend with. The tech giant previously posted fourth-quarter revenue guidance of revenue between $140 billion and $148 billion, which would mean year-over-year growth of 2% to 8%. That’s lower than Street expectations $155.15 billion, according to Refinitiv.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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