Brace Yourself For Black Friday Fever

The national ritual of frantic sales on the day after Thanksgiving will soon commence. It’s called “Black Friday,” although I prefer to call it: “The Day of the Locust.”

Regardless, projections are optimistic this holiday season for e-commerce as well as bricks-and-mortar retailers.

Deloitte’s 2022 Black Friday-Cyber Monday Survey, which examines what retailers can expect from American shoppers between Thanksgiving and Cyber Monday, estimates that consumers will spend an average of $500 during this shopping period (online and at physical stores), up 12% from last year.

Adobe Analytics predicts that U.S. online holiday sales will reach $209.7 billion from Nov. 1 to Dec. 31, representing a year-over-year increase of 2.5%. That may seem like lackluster growth, but considering economic headwinds, it’s remarkably resilient.

Groceries are set to hit a record $13.3 billion in online spend this year, as consumers plan holiday meals.

Adobe expects that discounts also will hit record highs, up to 30% and more, this holiday season. Retailers, e.g. Target (NYSE: TGT), are grappling with bloated inventories and they’re implementing huge discounts that are squeezing profit margins.

The research group called Innovating Commerce Serving Communities (ICSC) recently released its survey, Thanksgiving Weekend Intentions, which expects consumer spending to reach $125 billion on Thanksgiving Weekend this week, despite high inflation and rising interest rates.

The ICSC report also expects 89% of consumers to shop in the period beginning Thanksgiving Day and ending on Cyber Monday.

Tom McGee, president and CEO of ICSC, stated: “While high inflation and rising rates may impact how consumers spend this holiday weekend, it’s clear that they do intend to spend on Black Friday and beyond. The earlier start to the holiday season this year hasn’t dampened enthusiasm for traditional milestones like Black Friday and Cyber Monday, and we anticipate consumers will increase spending compared to last year across the holiday weekend.”

As the chart shows, shoppers are getting a head start on shopping this year, with many retailers planning to be open on Thanksgiving Day.

Retailers are experiencing a mixed bag this quarter. Companies that are adept at creating supply chain efficiencies and selling discounted consumer staples, such as Walmart (NYSE: WMT), are reporting strong operating results and forward guidance. Those that are stuck with a glut of consumer discretionary items, such as Target, are faring less well.

For Q3 2022, the blended earnings growth rate for the S&P 500 is 2.2%, according to the latest data from research firm FactSet.

To date, 146 of the 204 companies in Refinitiv’s Retail/Restaurant Index have reported their earnings results for Q3 2022, representing 72% of the index. Among those companies that have reported their quarterly results so far, 69% posted earnings that surpassed Wall Street’s expectations, while 1% delivered in-line results and 30% reported earnings that missed estimates. The Q3 blended earnings growth rate for the sector currently stands at 2.9%.

These numbers are crucial to the American economy and stock market. About three-fourths of U.S. gross domestic product is made up of consumer spending, and in turn about three-fourths of consumer spending occurs during the holidays.

And of course, the traditional start to the seasonal spending madness is Black Friday, which this year falls on November 25.

In my usual curmudgeonly way, I plan to stay home on Black Friday and refrain from any shopping. However, thankfully for the U.S. economy, millions of American consumers have other ideas.

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