As was widely expected due to a healthy economic backdrop characterized by record low unemployment, rising rages and high credit scores, Black Friday and Cyber Monday sales have been huge this year. Mastercard projects that overall Black Friday sales measured $23 billion this year, up 9% year-over-year, while Adobe says that digital sales on Black Friday rose a whopping 24% to $6.2 billion. Meanwhile, digital sales on Thanksgiving Day were up nearly 30% year-over-year, while Cyber Monday sales are expected to be up 18% year-over-year.
Overall, the 2018 holiday shopping season is off to a really good start.
But retail stocks aren’t feeling the love from Wall Street. The stock market has corrected sharply downward since early October on fears of bigger tariffs and rising rates stunting economic expansion. Retail stocks haven’t been spared in the sell-off. The SPDR S&P Retail ETF (NYSEARCA:XRT) is down nearly 15% during that stretch.
But, this feared slowdown clearly isn’t happening here or now. As such, the recent selloff is based more on speculation than tangible numbers. The tangible numbers right now are pretty good, and should remain pretty good for the foreseeable future.
From this perspective, retail stocks should are positioned for a nice rebound into the end of the year. But not all retail stocks should be treated equally. As with every other industry, they are some winners and some losers. With in mind, here’s a list of 7 retail winners, which came out ahead this Black Friday and are poised for a nice end-of-year rally.
Retail Stocks That Won This Black Friday: Lululemon (LULU)
Perhaps the biggest retail winner this Black Friday was Lululemon (NASDAQ:LULU).
The company entered the holiday shopping season with a ton of momentum. In each of the past two quarters, comparable sales rose nearly 20%. Considering a Piper Jaffray survey of American teenagers found that the brand continues to rapidly gain mind-share, one could’ve reasonably expected that Lululemon was going to have a big Black Friday this year.
Indeed, the retailer did have a big Black Friday. Lululemon’s online search interest trends have been favorable this year, and got a huge unprecedented spike during Black Friday and Cyber Monday, when Lululemon’s website crashed due to too much traffic. Moreover, local newspapers across the country highlighted Lululemon as being one of the most packed stores during Black Friday. This was true in Detroit, Minnesota, Cincinnati, Denver, Honolulu, Las Vegas, Omaha, and more.
Overall, Lululemon had a really good start to the 2018 holiday shopping season. This company is slated to report third-quarter numbers in early December. Those numbers should reflect this recent strength, as should the guide. As such, a healthy beat-and-raise Q3 report could spark a big end-of-year rally in beaten up LULU stock (it’s more than 20% off recent highs).
Retail Stocks That Won This Black Friday: Target (TGT)
Another big winner this Black Friday was Target (NYSE:TGT).
Much like Lululemon, Target entered the 2018 holiday shopping season with a ton of momentum. In each of the past three quarters, comparable traffic growth at Target was running in excess of 3%, which marks decade-best comparable traffic growth. Also, in each of the past two quarters, Target’s comparable sales growth was in excess of 5%, while comparable digital sales growth was near 50% last quarter.
Also much like Lululemon, it appears Target turned that recent momentum into strong Black Friday sales. Search interest related to Target hit multi-year highs in the U.S. during Black Friday 2018. Meanwhile, despite this surge in search interest, Target was one of the few large retailers that didn’t suffer from a website outage during the shopping frenzy. Also, this is the first holiday shopping season without Toys R Us, and Target appears to be the big winner of these up-for-grabs toy sales.
Overall, it looks like more retail consolidation and robust digital sales powered a strong start to the 2018 holiday shopping season for Target. This company just reported a double-miss Q3 report with an uninspiring guide, and the stock is down 20% in a few days. But, we are now in oversold territory, the valuation is cheap, and the holiday numbers are shaping up to be good. As such, you have all the right ingredient for an end-of-year relief rally.
Retail Stocks That Won This Black Friday: Kohl’s (KSS)
Next to Target, the other big-box winner this Black Friday was Kohl’s (NYSE:KSS).
Although growth at Kohl’s has been slowing into the holiday season, comparable sales growth rates still remain healthy and above trend. Last quarter, comps rose 2.5%. That continues a multi-quarter slowdown in comparable sales growth, but that is mostly due to a tougher lap than anything else. On a two-year stack basis, comparable sales growth has actually improved from up 0.9% in the beginning of 2018, to up 1.1% through the first nine months of 2018.
This steady growth narrative continued into the holiday season. Kohl’s CEO Michelle Gass told CNBC that the company was selling 60 Instants Pots online per minute on Thanksgiving en route to a record digital sales day. Search interest also hit an all-time high this Black Friday, while there were reports that stores were also still fairly busy.
Overall, it looks like steady brick-and-mortar traffic and huge digital sales growth fueled a strong start to the 2018 holiday shopping season for Kohl’s. Much like other retail stocks, this stock is down in bear market territory. But, the company’s recent earnings report was a double-beat-and-raise report that included healthy margin expansion. As such, the fundamentals remain strong, and as sentiment improves, KSS stock should rebound into the end of the year.
Retail Stocks That Won This Black Friday: Ulta (ULTA)
On the cosmetics front, the big winner this Black Friday was Ulta (NASDAQ:ULTA).
Comparable sales growth and margin trends at Ulta have been healthy and improving for the past several quarters. But, the big story here is the exclusive launch of Kylie Jenner cosmetics products at Ulta stores for the first time this holiday season. Considering Kylie Jenner’s huge social media following and arguably unparalleled clout in the cosmetics world, this catalyst was expected to supercharge holiday numbers for the cosmetics retailer.
It appears as though that is exactly what happened. Ulta’s website crashed during the shopping frenzy, and that is a good thing because it illustrates just how many people were rushing to Ulta.com to find the best deals on cosmetics products. Not surprisingly, search interest related to Ulta spiked to an all time high this Black Friday.
Overall, it looks like the Kylie catalyst is delivering on high expectations for Ulta this holiday shopping season. Unlike other retail stocks, Ulta hasn’t struggled all that much over the past two months. Since early October, it is actually up 6%. Thus, a lot of this positive catalyst is already priced in. But because there’s still a lot to like about Ulta, the end-of-year retail rally will like lift Ulta stock higher, too.
Retail Stocks That Won This Black Friday: Foot Locker (FL)
If Ulta won the cosmetics battle on Black Friday, then Foot Locker (NYSE:FL) won the footwear battle.
This company entered the holiday shopping season on a tear. Just before Thanksgiving, Foot Locker announced a robust double-beat quarter that included 2.9% comparable sales growth (the best mark since late 2016) and continued gross margin expansion. Management also sounded a bullish tone on holiday sales through new premium products.
The early read for Foot Locker during Black Friday is just as solid as those Q3 numbers. Young shoppers were big contributors to the shopping frenzy this year, and young shoppers are in love with Nike (NYSE:NKE). The best place to get Nike product is either through Nike’s website, or a Foot Locker store. As such, considering young shoppers likely bought a lot of Nike product this Black Friday, it looks like Foot Locker did pretty well.
FL stock has rallied big over the past week due to strong Q3 numbers. But, if holiday shopping tends remain favorable, this stock will keep going higher. The valuation is still cheap, and the stock is still well off all-time highs. As such, there is more firepower left for further gains.
Retail Stocks That Won This Black Friday: Amazon (AMZN)
This year was a digital-sales gold rush, and that means digital-sales leader Amazon (NASDAQ:AMZN) was a big winner.
Amazon didn’t enter the holiday season with much momentum. If anything, the company’s e-retail business was rapidly losing momentum. As I’ve highlighted before, Amazon’s e-commerce business is slowing as other retailers grow their digital presence. Nonetheless, Amazon still remains king, and everyone else has a long ways to go before they even get close to competing with Amazon at scale.
Because of its e-commerce dominance, Amazon was likely a big winner during Black Friday. The whole narrative during Black Friday was a surge in digital and mobile sales. Specifically, whereas Mastercard projected 9% growth for total Black Friday sales, Adobe projected 20%-plus growth for digital Black Friday sales and even bigger growth for mobile sales.
If e-commerce did really well on Black Friday, so did Amazon. It’s that simple. Forget the slowing growth. Forget the bigger competition. Amazon is still king in e-commerce, and because e-commerce did well on Black Friday, so did Amazon.
Retail Stocks That Won This Black Friday: Shopify (SHOP)
Shopify (NYSE:SHOP) isn’t a pure retail stock. It’s a tech stock. But, it has huge retail and Black Friday exposure, and as such, it is on this list.
Shopify entered the holiday season with a ton of momentum. Q3 numbers, released in late October, were very good. Revenues rose nearly 60%. Gross merchandise value rose 55%. Subscription revenue moved 46% higher, and merchant solutions revenue jumped nearly 70% higher.
This momentum continued into the holiday season. Shopify announced that gross merchandise value on Black Friday was $573 million, and exceeded the 2017 total by early afternoon. This big growth makes sense. After all, the big driver of Black Friday sales this year was digital, and Shopify provides tools for digital retailers. Thus, as goes digital retail, so goes Shopify.
SHOP stock has been on an mini-uptrend ever since the strong Q3 report. This uptrend should persist if digital retail sales trends remain favorable throughout the rest of the holiday season.
As of this writing, Luke Lango was long LULU, TGT, FL, AMZN, and SHOP.
