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December 2, 2015

Online Sales Steal Black Friday’s Thunder

by Jharonne Martis.

Cool sweater weather finally arrived in much of the country, but the retail sales forecast for November still doesn’t reflect a robust environment. The Thomson Reuters Same Store Sales Index forecast is for a decline of -0.8%. Excluding the drug store sector, the SSS growth rate is seen falling -1.4%. These numbers are considerably weaker than the November 2014 gain of 5.3% in each category.

Among the November factors: retailers are facing tough 2014 comparisons. Although Black Friday sales are part of the November sales period, most of the “doorbuster” deals have now moved online and are being posted days in advance, stretching the Black Friday promotions outside of brick and mortar stores.

In the past, Black Friday shoppers used to walk in a store and be bombarded with deep discount deals that were only available for a limited time. As a result, shoppers would feel pressured to take advantage of these timely deals, and give in to impulse shopping. Today, however, the online deals are giving shoppers enough time to do price comparisons before finalizing their purchase.

Among the major mall retailers, L Brands saw strong traffic on Thanksgiving eve going into Black Friday, while Gap opened only for a few hours on Thanksgiving Day and offered 40% off throughout the store.

Meanwhile, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is projected to post a 1.3% growth for Q4, below last year’s 2.8% SSS growth, suggesting that holiday sales will be weaker than 2014.

Exhibit 1. November 2015 SSS estimates

Source: Thomson Reuters I/B/E/S estimates. Note: Aggregate mean data is revenue weighted.

Source: I/B/E/S estimates. Note: Aggregate mean data is revenue weighted.

Comparison shopping
All sectors are facing the most difficult comparisons from a year-ago. The Discount group has a
-0.8% SSS estimate, below the 4.8% pace set in November 2014. Costco has a -0.9% comp estimate in the group, below its 5.0% November 2014 result. This discounter is negatively affected by foreign exchange rates, among other factors. Excluding the impact of gasoline sales, the Costco SSS figure rises significantly to 4.9%. Meanwhile, Fred’s has a 1.4% SSS estimate vs. a -2.3% posted in November 2014.

Analysts expect the Apparel sector as a whole to report a -2.6% SSS, compared to the 6.5% gain in SSS recorded in November 2014. Excluding Gap, one of the heaviest-weighted components in the sector, the Apparel group is set to improve at 1.8%, below the 7.2% result posted in November 2014. L Brands has the strongest estimate in this group at 3.0%. Gap has the weakest SSS estimate in the group at -6.3% SSS vs. 6.0% comparison from 2014. Its Banana Republic Global division is expected to post the softest SSS at -10.9%. Meanwhile, its Gap Global division has a -4.6% SSS estimate. Stein Mart and Cato Corp. are expected to post flat comps.

Teen Apparel stores have the weakest estimates within the retail universe. Same store sales are expected to post a -6.8% comp for the sector. The Buckle is facing an easy -1.0% comparison from a year-ago and is expected to post -6.5% SSS, while Zumiez is expected to post a -7.3% SSS.

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