It’s that time of the year again! As the weather gets colder, so too do the hearts of thousands of shoppers. After all, nothing is quite so sadly American as killing your fellow man over Black Friday deals.
So deadly is this radicalization of the suburban consumer that there are websites monitoring fatalities that occur on Black Friday. The plus side — if there is one — is that this is the only type of radicalization that won’t end up with you on a government watch list.
As cynical as I may sound, the reality isn’t too far off from my heavy-handed description. Spending time with your family is a noble exercise, and one that is publicly encouraged by companies. However, what they really want is for you and millions of others to peruse their temptation-inducing Black Friday deals. With several retailers not having the brightest of years, this Black Friday is a make-it-or-break-it proposition. Thus, there’s an explosion of stores opening on Thanksgiving Day, and thereby, encroaching on family mores.
The good news for those on the selling side of the counter is forecasted optimism for Black Friday deals. According to the National Retail Federation, consumer expenditures for November and December — excluding transportation and dining sales — is expected to hit nearly $656 billion. That’s a 3.6% increase from last year’s tally, and is substantially higher than the 2.5% average growth rate over the past ten years.
Of course, we’ve all seen the value of statistical forecasting. For a majority of this nation’s electorate, there is virtually none. If the best analysts can’t figure out which one of two candidates will win the White House, how can they predict the “Wild West” of Black Friday? With so many variables on tap, several mainstream publications have criticized using Black Friday deals as a reliable economic indicator.
Then again, this year’s sales bonanza can actually meet or exceed lofty forecasts. Ironically, the Donald Trump victory that destroyed the statistical industry’s reputation may in fact induce shoppers to the retail aisles. There’s substantive evidence that retail therapy is psychologically beneficial. If there’s ever been a time when most Americans need escapism, it would be right now.
But no matter how much Donald Trump has you crying in either agony or adulation, nothing can reverse negative sentiment for all retailers. Therefore, there are companies that will see record holiday sales — and others that may be hanging by a thread. Here are two stocks to buy, and two stocks to avoid ahead of Black Friday.
Black Friday Deals to Buy: Best Buy Co Inc.
This wasn’t supposed to happen, not in the era of almighty Amazon.com, Inc. (NASDAQ:AMZN). The e-commerce giant simply revolutionized the retail industry, and no matter what happens, AMZN will surely be relevant over the next hundred years. Yet somehow, Best Buy Co Inc (NYSE:BBY) is more than holding its own against incredible odds.
This isn’t a knock on BBY stock by any means — many experts simply assumed the brick-and-mortar platform was dead.
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What exactly, then, prevents people from using BBY as their own personal showpiece, and later registering the actual sale to AMZN?
The answer that Best Buy offers is a more focused business. In their most recent quarterly earnings report, BBY leapfrogged consensus profitability estimates. As Bloomberg noted, U.S. “sales were driven by mobile phones, home theater and wearable technology.” Not surprisingly, these are products that benefit from in-person tutorials or trials. Sure, you can buy these items through Amazon; however, if you get it wrong, the return policy can be a hassle. Best Buy simplifies that process substantially.
The comeback story of BBY appears to be the real deal, and you don’t want to argue with momentum — just ask Hillary Clinton.
Black Friday Deals to Buy: Macy’s (M)
If I were to tell you that Macy’s Inc (NYSE:M) is one of the stocks to buy ahead of Black Friday, inevitably, the common response would be why? Department stores had been a veritable mine field in the latter half of 2015. Sentiment is comparatively better this year, but is also extremely volatile. The age-old question of brick-and-mortar stores in the age of digitalization continues to haunt M stock and its peers.
Again, why M?
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Perhaps there would be no talk of mixing politics and business if the considerably more attractive Trump family member was tied to JCP and not M.
Like the aforementioned BBY, Macy’s management recognized that hard decisions had to be made. Essentially, they had to roll out what works and kick out what doesn’t. Early indicators suggest that M has done exactly that. From a marketing perspective, Macy’s is delivering the meat. There are multiple Black Friday deals that are 50% off or more. This is no time to go cheap, and M stock has laid down the gauntlet.
The bottom line is that Macy’s is desperate, and that type of energy can often result in beautiful things for investors.
Black Friday Deals to Avoid: Wal-Mart Stores, Inc.
Let’s be real — nothing truly epitomizes Black Friday quite like Wal-Mart Stores, Inc. (NYSE:WMT). What else can we expect from a company that sells everything and wants to take over the world?
There’s also the aspect that some of our best and brightest don’t necessarily shop for WMT Black Friday deals. Again, in the interest of keeping it real, is there any surprise that people act like feral animals at WMT?
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However, it might be overplaying its cards.
Sure, the initial victory goes to WMT. Their global internet sales increased by nearly 21% for their most recent quarter. Getting a jump on Black Friday deals seems like a logical choice. Ordinarily, investors would be happy with the strategy. But it’s always an uncomfortable proposition to go up against AMZN. They will not take this lying down. Certainly, nothing strikes fear among traditional retailers like a ticked-off Amazon.
At best, WMT can hope for a bloody stalemate. But from an investor’s point of view, it’s a zero-sum game, especially if you don’t like the sight of blood.
Black Friday Deals to Avoid: Abercrombie & Fitch Co.
If the 2016 election has taught us anything, it’s that we are a nation of second chances. Despite being hounded by awful accusations — some real, some fabricated — Donald Trump will be our next president. Apparently, all it took was an apology to get right with the American people.
On the retail front, Abercrombie & Fitch Co. (NYSE:ANF) is hoping for some redemptive love. Does ANF stock have the magic charm to pull it off?
In one word, no.
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To be fair, ANF has done a complete 180 in terms of their marketing strategy. Today, Abercrombie is ANF without the racism and sexism — this is what other companies call “clothes.” The only problem is that the apparel maker spent a lot of time double-dipping in offensive materials before they got their act together.
The other issue is that Trump had the benefit of the Electoral College. ANF, like any other business, operates in a pure democracy. That means they have to fight for every sale. This is problematic due to the lingering existence of Aeropostale Inc. (OTCMKTS:AROPQ). Although Aeropostale declared bankruptcy, they’ve been operating their stores much longer than predicted. With absolutely nothing to lose, the zombie store can roll out insane discounts and impinge upon ANF.
There’s also the fact that non-bankrupt competitors are anxious to get positive traction. Overall, it’s too much to expect great things from ANF this Black Friday.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
