Best and Worst Stocks After the Black Friday Sales Surge

There were many folks, including myself, who expressed concern about whether consumer spending will hold up this holiday season. But after very strong Black Friday numbers, it might be time for investors to take a serious look at some of the big retail stocks and electronics manufacturers that could benefit from a strong finish to 2011.

According to the National Retail Federation, shoppers spent a record $52.4 billion across the long Thanksgiving holiday weekend — up an impressive 16.4% from 2010. Even more impressive was a stunning 39% increase in online Thanksgiving spending — a trend that hints Cyber Monday sales today could blow the doors off, too.

Of course, that doesn’t mean everyone is doing well. It’s still a very difficult environment out there in the wake of the financial crisis and amid persistently high unemployment, so investors should be wary. Many folks doubt whether this trend is sustainable and think this is just a very good start to the season that will lose momentum.

So which companies are the winners from this holiday spending trend, and which stocks are set to fall behind? Let’s take a look:

Biggest Loser: Sears

What Best Buy (NYSE:BBY) and others gained, other retailers naturally had to lose. But one merchant perpetually getting squeezed out by the competition is Sears Holdings (NASDAQ:SHLD), which operates not just the namesake department stores but also 1,300 Kmart discount stores nationwide. Additionally, Sears produces Kenmore appliances — which, thanks to big competition from BBY and others, aren’t moving well during regular shopping hours, let alone during the holiday rush.

To top it off, serious cash flow problems have resulted in what can only be called as neglect for many run-down Sears locations — turning off shoppers in what already is a bitter fight for every nickel consumers have to spend these days. Even if shoppers continue to open their wallets like this for many months to come, it’s doubtful Sears will capitalize on the trend in the same way other retailers will.

Also Disappointing: Apple

True, sales at branded Apple Inc. (NASDAQ:AAPL) retail locations are not the bread and butter of this gadget maker. True, it’s online sales were strong again this Black Friday weekend, with Apple.com seeing double-digit growth over last year. But with the best retail sales per square foot and Apple’s website now ranking as the No. 3 online merchant in the U.S., you would think there would be tremendous potential for a Black Friday boom. Just think what the company could do with its “insanely great” products, deep discounts and loyal customers!

Instead, the markdowns were paltry — a mere $41 off the iPad 2, from $399 to $458. That’s less than 10%. Same for the iPod Nano, down just $11 to $118. Very unimpressive. The iPhone wasn’t marked down squat, either, but that is understandable considering we are less than two months removed from a launch that boasted 4 million iPhones sold in just three days.

It might just be sour grapes as a consumer, but it seems to me that the inclusion of a $99 iPhone indicates Apple is toying with capitalizing on lower-margin sales with smaller receipts but higher volume. That’s the very definition of Black Friday, and you could make the case that this past weekend was a missed opportunity for Apple. After its first disappointing earnings report in recent memory, no less.

Biggest Winner: Best Buy

After a brutal 2010, Best Buy decided to amp up its game with aggressively low prices on TVs and other big-ticket items along with exclusive in-store-only deals, hoping volume would make up for thin margins. It appears to have worked, with anecdotal evidence from local news reports piling up about crazy long lines and with many a Wall Street analyst applauding the big-box retailer’s strategy.

The fact that Best Buy’s seasonal work force was just 15,000 this year — half of 2010’s total — makes the success all the more impressive. To top it off, Best Buy’s online sales were up by double digits compared to last year. That could mean big Cyber Monday sales for BBY.

Runner-Up: Amazon.com

Of course, the biggest reason for exclusive Black Friday sales at brick-and-mortar Best Buy stores is because Amazon.com (NASDAQ:AMZN) has redefined the entire retail universe. Shoppers at the mall can now whip out their smartphone and check prices against online sales, and with Amazon’s extensive operations and low overhead, it makes it hard to compete.

Throw in the fact that the vast majority of holiday shoppers are taking to the web for at least some of their purchases, and any uptick in sales is amplified exponentially for Amazon. ComScore said 50 million Americans visited online retail sites on Black Friday, with Amazon.com tallying 50% more than the No. 2 retail site.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2011/11/black-friday-retail-stocks-shld-aapl-bby-amzn/.

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