Show of (virtual) hands, folks: do Black Friday and its newercousin Cyber Monday deals still matter to consumers – and more importantly, toretail businesses’ bottom lines? Personally, I’ve never seen the point of BlackFriday – I’d much rather loll in my PJs and eat turkey leftovers (after ausually uneventful half-day of trading) with my family on the Friday afterThanksgiving. I guess I see the point of Cyber Monday a bit more: there’snothing like clearing the hurdle of Thanksgiving to make you feel the rushtowards the next big holiday, and the Monday after Thanksgiving is typicallyslow enough that sneaking in a little holiday shopping makes sense.
But this year Black Friday has come under fire, mostlynotably by REI who grabbed a lot of media attention earlier this month whenthey announced they’ll give all their employees a paid holiday on Friday whilekeeping their doors closed to consumers. As Nerdwallet reports, many other retailers includingCostco, Home Depot, Marshall’s, Nordstrom and others will follow REI’s example.
This got me curious about what investing and trading typesthought of these so-called retail holidays. Are they a necessary boon to theretail stocks many of us like to trade? Or a pointless sideshow with littleimpact to the bottom line?
On the pro side we have WSJ’sPaul Vigna. In his article BlackFriday Deals Still Matter, for Retailers and Deal-Crazed Consumers, hesums up the retail holidays’ continued relevance succinctly: “retailers cleanup”. Quoting a report by LPL Financial about the retail sector, he notes:
’The heavyadvertising of discounts would lead one to believe that Black Friday sales areless profitable,’ LPL Financial wrote in a report. ‘However, gross profitmargins for retailers are actually highest during the holiday season.’
Retailers negotiate special prices withsuppliers for Black Friday sales, the firm said, so the hit to margins may notbe as big as you think. Also, and this is an age-old trick, those great dealsare really being used to lure customers into the store, where they’ll beenticed to buy some higher margin items.
TIME’s Money columnist Brad Tuttle begs to differ. In his post Why Black Friday and Cyber Monday ArePretty Much Meaningless Now, he notes that the continued sprawl of holiday deals across muchof November and December renders the supposedly special discounts of those twomagic shopping days a lot less credible. He also remarks that “sales on Black Friday were down roughly 10%last year. According to a new survey conducted for Ibotta, 65% of shoppers ‘believe Black Friday is not as big ofa deal as it used to be.’ Roughly 50% also believe that the best deals will beavailable after Black Friday has passed.”
What’s your take? Did you hit the stores at midnight Friday(or the Interwebs on Monday), or do you find the whole concept meaningless? Andwhat do you make of retail stocks who either lean heavily on the Black Fridayconcept or opt out entirely?
[image: Black Friday & Cyber Monday byVanderelbe.de onFlickr]
Trading has inherent risk due to system response and accesstimes that may vary due to market conditions, system performance, and otherfactors. An investor should understand these and additional risks beforetrading.
Investments involve risk, losses may exceed the principal invested, and thepast performance of a security, industry, sector, market, or financial productdoes not guarantee future results or returns. TradeKing provides self-directedinvestors with discount brokerage services, and does not make recommendationsor offer investment, financial, legal or tax advice. You alone are responsiblefor evaluating the merits and risks associated with the use of TradeKing'ssystems, services or products. If you have additional questions regarding your taxes,please visit IRS.gov or consult a tax professional. TradeKing is unable toprovide any tax advice.
TradeKing is not affiliated with, does not sponsor, is not sponsored by, doesnot endorse, and is not endorsed by the companies mentioned above or any oftheir affiliated companies.
At the time of publication and in the preceding month, TradeKing and/or DonatoMontanaro did not have ownership greater than 1% in any stocks mentioned; didnot have any other actual, material conflict of interest known at the time ofpublication; have not received compensation from a public offering nor frominvestment banking services related to any companies mentioned within the past12 months, nor expect to receive any in the next 3 months; nor engaged inmarket making in the securities mentioned.