How is Retail Doing This Holiday Season?

As the holiday shopping season kicked into high gear with Black Friday and Cyber Monday, markets will be watching sales reports closely, especially with the fewest possible days between Thanksgiving and Christmas. So, we thought it would be interesting to focus in on some of the current trends in retail and take a look at what the stock market is seeing.

U.S. consumers are planning on spending more for the 3rd year in a row…

U.S. Shoppers Plan to Increase Holiday Spending
(National Retail Federation)

The current environment looks very difficult for the average apparel-oriented mall retailer…

With 3Q results for the majority of our retail coverage behind us, we recap key trends. Overall the apparel retail landscape remains challenging. Department store and specialty retailer comps mostly disappointed, with evidence of challenged traffic, weakening trends in lower quality malls, and ongoing headwinds from tourism. Promotional activity remains elevated, with particularly competitive pricing in home and weather sensitive categories, a key driver of disappointments at gross margin. On the other hand, off price remains a bright spot.

We remain cautious on the backdrop heading into holiday. We acknowledge that November appears to be off to a decent start driven by colder weather, and that guidance has now been rebased across the group. However, we see a tough operating picture in the months ahead given the shorter holiday selling season, ongoing heightened promotions, and elevated inventories at most retailers and brands. We also highlight commentary from several retailers suggesting an absence of pricing power in several categories affected by tariffs.
(Goldman Sachs)

A sampling of the fall quarter comparable (comp) store sales reported in the last three weeks…

• Walmart comp sales at +3.2% and e-commerce sales up 41%
• Target comp sales +4.5%
• Ross Stores comp sales +5%
• TJMaxx comp sales +4%
• Macy’s comp sales -3.9%
• Gap comp sales: Old Navy Global: -4%; Gap Global -7%; Banana Republic Global -3%
• Kohl’s comp sales +0.4%. Company acknowledged that it “experienced softness during the middle of the quarter, as it saw an increasingly competitive promotional environment”. The company expects the heightened promotional environment to continue through the balance of the year.

Find out which stocks are poised to be the top of the retail stocks list for 2019, and which are laying at the bottom, plus, much more in our special retail edition of the Weekly Research Briefing.

Read more in latest edition of the Weekly Research Briefing, Holiday Retail Special >