Black Friday Predictions

By AnnaLisa Kraft - September 19, 2012 | Tickers: AMZN, NKE, WMT | 0 Comments

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There’s just 66 days to go ‘til Black Friday. Which retailers are going to have bright sunshiny earnings come January?

I love Black Friday, the relatives are out of the house, the house is all clean and all those Thanksgiving dishes have been lovingly wrapped for leftovers. I stay home in the smug satisfaction that I won’t get trampled or have to wait in the frigid air. I won’t brave Black Friday deals not since I got locked into a Texas toy store for five hours for my own protection. Sure, it was a good sale but was it worth being held hostage?

I know I’m not alone as buying online has grown at double digits every year; it’s just safer and more convenient. You can order everything in your pink bunny pajamas instead of planning a military style assault. Time Magazine reported that electronics, in particular, will be a big seller online.

 Already the Black Friday deal sites have been falling all over themselves to post the newest snippets of news. We know about Wal-Mart Stores (NYSE: WMT) layaway policies just starting September 17. Nike (NYSE: NKE) will be releasing the Michael Jordan IV Black/Red, also called the "Bred" shoes, on Black Friday and Best Buy and Wal-Mart will open their doors at midnight.

The predictions for sales have come hot and heavy with Shopper Trak, a market research firm, predicting that that holiday sales will only rise 3% as opposed to 2011’s rise of 3.7% Then, the Hay Group got anecdotal evidence from interviews with retailers showing 75% of retailers expect to ring up higher sales and 30% plan to hire more.

Wal-Mart, Nike and Amazon.com (NASDAQ: AMZN) should be major beneficiaries of ongoing trends. Target, Wal-Mart’s main competitor, had told the Goldman Sachs retailing conference just two weeks ago they will not be holding the kind of doorbuster sales of the past; there will be deals but not the "crazy" kind. They intend to focus more on the some of the designer for Target collections for the holidays.

The Smiley Face

Wal-Mart is pennies away from its all-time high at $75.24. It has a yield at 2.20% and a P/E of 15.71. Wal-Mart operates over 10,000 stores in 27 countries and has 2,200,000 employees. It’s been moving into an omnipresent position in the lives of its customers with opticians, health clinics, pharmacies, check cashing and all the food, electronics and clothes they already carried. It will be interesting to see the impact of the MCX-the Merchant Customer exchange in which their customers will be able to pay with a digital wallet on their smartphone. As for the earlier comment that electronics will likely move to the web, Wal-Mart offers the option to buy deals on their website and then the customer can pick it up at their local store.

Online shopping is expected to increase 16.8% this year according to eMarketer. They also expect the two months of November and December to generate a quarter of full year ecommerce sales. $54.5 Billion in sales is expected online.

Bricks and mortar stores' loss of sales to ecommerce should be offset by the calendar with an extended 32 days of shopping between Black Friday and Christmas. Fear not! Bricks and mortar stores, even with a multiyear exodus to online shopping, 92% of general merchandise, apparel and accessories, furniture and other sales still take place in brick and mortar stores.

The Swoosh

Nike should benefit from the “Bred Shoes” rolling out on Black Friday as well as the LeBron X shoes whose price was so controversial the head of the National Urban League Marc Morial called for the shoes to be pulled off shelves. He called Nike “insensitive” to this country’s economic problems and joblessness. Nike lowered the $315 shoes to around $270. Moriel’s call only emphasized the amount of demand for the shoe. There should be an expected 3.5% rise in foot traffic this holiday season for apparel and accessories stores. Nike had a worse than expected last quarter, yet another company pointing to Europe as the cause of its woes. Nike will report again on September 27.

Nike has a yield of 1.50% and a P/E of 20.43.Their debt is only slightly more than one tenth of their total cash. Nike is down more than 10% from its 52 week high of $114.81. The quarter they’re reporting next week should reflect some Olympics bump.

The Smile on the Box

The company with the smile on the box, Amazon, has an astronomical P/E of 314.25 and this growth stock should be handled with due diligence. The amount of content downloaded after the holidays should soar as well as sales from other of their e-commerce sites, like Zappos’ and Woof.com. As CEO Jeff Bezos said it’s a reverse razor and blade model. Get the devices out and the content sales will follow. The Amazon Fire HD will likely be one of those holiday hits despite early tepid reviews.

Black Friday was traditionally the day merchants’ accounts switched to a profit on their ledgers, noted with black ink. Working for 11 months without profit, now that’s rough. But I think these three will enjoy plenty of profits and higher EPS. Earnings reports in 2013 should be festive.

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