Benzinga - by Oleg Spilka, Benzinga Contributor.
While Black Friday has grown to become one of the world’s largest annual consumer events in its own right in recent years, economic headwinds have threatened to dampen the festive spirits of shoppers in the US ahead of the big day. Despite a cost-of-living pinch to Black Friday shoppers, it’s reasonable to expect investment opportunities among discount retailers on Wall Street.
Worryingly, National Retail Federation figures suggest that 2023’s holiday sales growth is set to be the slowest for five years, with increases limited to just 3% or 4% for an expected total of $957 billion.
Should Black Friday sales fall within expectations, it would represent a sizeable fall from last year’s growth of 5.4%.
Worryingly, brick-and-mortar retailers like Walmart and Macy’s have already reported fewer customer visits despite offering Black Friday discounts earlier in November. However, the unseasonably warm weather throughout the month could also have played a role in discouraging shoppers from visiting.
Despite the struggles of some retailers, it’s widely expected that the economic climate will see consumers increasingly shift their attention towards discount retailers that can help them stretch their pennies further.
According to analysts Brad Thomas and Ashley Ownes, consumers will likely ‘remain pressured’ by lingering high inflation rates. However, they could still help to generate a healthy Black Friday boost for retailers.
"We believe consumers will likely show up for the Black Friday weekend and the pre-Christmas shopping period. However, we believe the consumer will increasingly shop sales events as they look for deals and bargains," the analysts explained.
Defying Expectations As Recession Fears Grow The 2023 Black Friday weekend is likely to be filled with complexity due to the exceptional economic circumstances at play.
The Consumer Price Index (CPI) stayed flat in October vs. September, which indicates that US inflation may finally be cooling down. However, the index remained 3.2% higher than this time last year.
We’ve also seen many retailers encounter their own expectation-busting rallies. Luxury lifestyle retailer Abercrombie & Fitch saw its stock rise to a 12-year high off the back of holiday season momentum, while retailers like Gap, Ross Stores, Target, and Walmart all topped their Q3 predictions with the likes of Gap and Ross Stores surpassing expectations.
The positive news comes as a leading gauge of future economic activity fell in October after a sustained decline in September based on worsening consumer expectations, according to the Conference Board.
In the wake of a consistent downturn, these indicators suggest that the US may have already entered a recession which could dampen consumer holiday spirits.
Which Stocks Offer Black Friday Potential? With a cocktail of economic headwinds impacting the major players throughout Black Friday weekend, it’s likely that we’ll see penny-pinching consumers flock towards discount retailers in the hunt for deeper bargains.
This is likely to pave the way for more investment opportunities among cyclical retail stocks that could continue to grow as the cost of living takes hold for consumers into 2024. Some notable performers for Black Friday and beyond include:
1. Amazon (NASDAQ: AMZN)
Despite a difficult 2022, Amazon’s stock market performance throughout 2023 has been exceptional, soaring more than 70% since the beginning of the year.
As a major Black Friday player with a vast network of online deals across many sectors, it’s likely that more consumers will look to Amazon for discounts ahead of the holiday season, but the stock has plenty more to be excited about than low-cost consumer goods.
“Amazon has expanded into several key areas,” explains Maxim Manturov, head of investment research at Freedom Finance Europe, “including Amazon Web Services (cloud computing), digital media, artificial intelligence and machine learning, grocery and food retail.”
2. Target (NYSE: TGT)
It’s been a tumultuous year for Target. The retailer faced boycotts and even vandalism for an LGBTQ+ campaign that critics furiously labelled ‘rainbow capitalism’.
Target’s recent hardships have seen a 5% decline in sales for Q3 2023, but the retailer has recently announced a special focus on catering to budget-conscious consumers.
Recently, the store announced that two-thirds of its toys would be available for $25 or less, while Target’s store brand Good & Gather have introduced 100 new products with half weighing in at under $5.
Target’s stock leapt 20% on its earnings report but is still struggling to reclaim its 2023 losses. However, a budget-friendly festive campaign could be a great way for the store to turn its fortunes around and welcome back lapsed customers.
3. Ross Stores (NASDAQ: ROST)
The rising cost of living is likely to see dollar stores and discount department stores find new revenue over Black Friday and beyond as shoppers look to make their finances stretch further in the festive period.
Notably, Ross Stores is well-positioned to enjoy a return to form, particularly if its Q3 earnings are anything to go by.
Ross Stores’ comparable store sales increased by 5% in the third quarter, with total sales reaching $4.9 billion–a sizeable increase on the $4.6bn received in Q3 2022.
With a key emphasis on discounted products, it’s likely that the recent positive sales activity for Ross Stores will point to changing consumer behavior that favors more budget-friendly outlets over the coming period.
Black Friday Opportunity Strong As Ever Despite tangible recession risks looming over the US economy, it’s likely that there will still be plenty of opportunities for investors to see positive movement for stocks over the Black Friday period.
While consumer spending looks set to slow down in comparison to recent years, we’re likely to see behavior shift more towards discount retailers in a bid to protect incomes against lingering economic headwinds.
Black Friday 2023 may be a heavily discount-focused period, there should still be plenty of opportunities for investors to buy into stocks that hold plenty of promise for the future.
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