Black Friday traffic falls as online gets bigger piece of spending pie
admin | December 4, 2020
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
If COVID has changed anything, it’s clearly changed Black Friday shopping habits. Tracking retail’s biggest winners and losers over the crucial holiday shopping period can help differentiate performance for their bond investors as well.
The days of mayhem – with stores opening at the crack of dawn to long queues, and consumers hustling to snag deals – seem long gone, as many turned to the internet this year to secure coveted items at large discounts. While Cyber Monday typically is the day for online deals, this year promotions were being offered as early as Thanksgiving Day and many continued throughout the entire weekend. U.S retail foot traffic was down 18% year-over-year for the holiday shopping week ended 11/29/20. While the traffic decline is large at face value, online sales for Black Friday were up 22% year-over-year to $9 billion. Cyber Monday posted its largest haul yet with record sales of $10.8 billion, up 15% year-over-year. Online sales for the five-day holiday period accounted for 35.2% of spending, up over 8% year-over-year, the largest one year gain since 2014.
Exhibit 1. Share of Holiday Shopping Spend (2014-2020)
Source: Numerator; Bloomberg; APS
Traffic Winners and Losers
Department stores witnessed some of the largest traffic declines, over 50% for Macy’s (M) and Nordstrom (JWN), as they saved some of their strongest promotions for online. Additionally, both stores were closed on Thanksgiving this year which also helped to negatively impact the year-over-year traffic trend. Off-price retailers TJ Maxx (TJX) and Ross Stores (ROST) also saw double digit traffic declines, down 21.6% and 36.4%, respectively. While TJX currently has a small online presence, ROST has none therefore cannot offset lost brick and mortar sales with online sales. However, both stores witnessed a 7% increase in traffic from the prior week period, a trend they have been witnessing since stay at home orders were lifted and store hours were normalized. Furthermore, third quarter results came in better than expected for both off price retailers as traffic and basket trends improved at both, underscoring the consumer’s focus on value.
Dollar General (DG) was the traffic winner over the holiday period posting 14.6% growth year-over-year and up 3.0% from the week earlier period. As with the off-price retailers, DG has no online presence. DG’s percentage of consumables (over 75% of sales) helps to aid traffic while its expansion in seasonal and home/personal discretionary items has increased impulse buying as the consumer looks to consolidate trips. DG continues to trade behind Kroger (KR) in the 10-year part of the curve by roughly 15 bp, however in the 30-year part of the curve, DG trades through KR by roughly the same amount. We believe DG 10-year bonds should collapse closer to KR and trade at a similar level given the impressive growth.
Amazon Wins Online Holiday Shopping
While numbers somewhat differ depending on the source regarding Amazon’s (AMZN) share of holiday spend, one thing they all agree on is that AMZN is the clear winner this holiday week. It is estimated that AMZN’s share of online holiday spend this year is in the 17%-19% range. That means that essentially $1 out of every $5 spent this past holiday week was on Amazon.com. Additionally, the company recently noted that 2020 has been its largest holiday season of record. AMZN continues to see strong sales of its Alexa and Fire TV devices, which are anticipated to help pave the way for AMZN to grow subscription- based services, cloud gaming, home security as well as secure advertising dollars. AMZN’s solid balance sheet is likely to continue to strengthen over the next year as both sales and EBITDA margin continues to grow. This could prompt ratings upgrades at Moody’s and Fitch who both currently maintain positive outlooks.
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Copyright © 2023 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.