Whitley blog

Stocks shrug off strong Black Friday sales weekend

NEW YORK/CHICAGO (Reuters) – Store chains had a strong start to the holiday shopping season, but investors who bid up retail stocks were not impressed as they waited to see how much of a sales lull might set in.

The Standard & Poor's Retail index (.RLX) had hit a 3-1/2 year high on Wednesday on hopes a slowly recovering economy would put shoppers in a buying mood during the "Black Friday" weekend, which refers to the U.S. Thanksgiving holiday and signals the start of the holiday shopping season.

The index was down 1.3 percent on Monday, a sign that investors may have missed the chance to bet on a recovering U.S. economy.

"It might be tough for the ... rally to continue into December, as retailers historically lag the markets post Thanksgiving following the November outperformance in anticipation of consumer strength heading into the holidays. " JP Morgan analyst Charles Grom wrote in a note to clients.

The biggest share losers included Nordstrom Inc (JWN.N), down 2.8 percent, Best Buy Cos Inc (BBY.N), which fell 2.9 percent, and off-price clothing sellers Ross Stores Inc (ROST.O) and TJX Cos Inc (TJX.N), which both shed nearly 3 percent.

"A lot of the enthusiasm is a bit misplaced," said Walter Stackow, an analyst with Manning & Napier, referring to the initial analyst and media reaction to Black Friday sales. "We still have a consumer who is heavily indebted," he added, noting that unemployment was still high.

Manning and Napier is an investment firm that owns Kohl's Corp (KSS.N), Nordstrom (JWN.N) and other retailers.

Amazon.com Inc (AMZN.O) and other online commerce sites were among the few companies whose shares rose, as investors bet retailers would win over more sales on Cyber Monday -- the Monday after the Thanksgiving weekend when many people return to work and make online gift purchases -- after Internet shopping increased over the holiday weekend. Amazon shares hit an all-time high during the session.

Analysts said that while consumers did buy for themselves and even purchased highly discretionary items like jewelry -- Zale Corp (ZLC.N) shares rose 3.6 percent on Monday -- they did not spend as profusely as they did before the recession.

In a survey of shoppers over the weekend, 16.3 percent said that they paid for their purchases with credit cards, down from 30.9 percent a year earlier, according to consumer research firm America's Research Group.

"The consumer is in what I call a wallet watch. They're just not jumping out there and going crazy," said Britt Beemer, president of America's Research Group.

BUT THE SHOPPERS CAME OUT

Still, analysts said that because of Black Friday weekend, promotions and more consumers buying for themselves, retailers were poised to report November sales above forecasts.

JP Morgan's Grom forecast that most retailers will likely "beat Street estimates by a wide margin."

The bulk of those sales reports are due out on Thursday. As of last Friday, analysts on average forecast a 3.5 percent increase in November same-store sales, according to Thomson Reuters data.

The National Retail Federation said that shopper traffic to stores and websites was up 8.7 percent between Thanksgiving Day on Thursday and Sunday, compared with the same period in 2009, and spending per person rose to $365.34 from $343.31 a year earlier.

The NRF data contrasts with that of Shoppertrak, which said that traffic to stores on Friday alone rose 2.2 percent and sales rose a mere 0.3 percent, which shows that where shoppers made purchases, it was often on discounted items.

While Black Friday weekend attracts a lot of public attention, analysts also noted that it does not necessarily make a great predictor for the entire holiday season.

"We're focusing on what we think are going to be market share gainers, whether you are talking about the holiday or beyond that," said Edward Jones analyst Matt Arnold. He named Target (TGT.N), Kohl's (KSS.N) and Tiffany & Co (TIF.N) as companies set to gain customers.

Among other big-name retailers, shares of Macy's (M.N) were down 2.7 percent on Monday, while Kohl's fell 1.6 percent and J.C. Penney Co Inc (JCP.N) was down 0.7 percent. Wal-Mart Stores Inc (WMT.N) shares were down 0.5 percent and Aeropostale's slipped 0.3 percent.

(Reporting by Phil Wahba and Brad Dorfman, editing by Michele Gershberg, Dave Zimmerman and Matthew Lewis)