Thanksgiving came and went. And with that, the pivotal holiday shopping season has begun.
But things are off to an inauspicious start as the American consumer just didn't perform as well as expected on Black Friday. Seems that 4K televisions and cheap tablets aren't motivating the kind of shop-till-you-drop attitude of years past. A lift in online traffic couldn't help overall results either.
Stocks dropped on Monday in response with the Retail SPDR (XRT) down 2.2 percent and is trading below levels seen in the run-up to Black Friday 2014. The question is: Can retailers entice American shoppers before the end of the year and restore investor confidence?
ShopperTrak surveys put in-store sales at about $12.1 billion on Thursday and Friday, down from about $12.3 billion in 2014. It seems the trend towards earlier promotions, such as store openings on Thanksgiving itself, could be diluting the draw of Black Friday which first started in 1983 when Sears opened its doors early.
Data from RetailNext indicates overall sales for Thursday and Friday fell 1.5 percent on flat customer traffic as average spend per shopper dropped 1.4 percent.
Analysts at Deutsche Bank told clients their specialty retailer channel checks revealed a "difficult" start to the holiday season as traffic slows and inventories rise. Of the more than 250 stores checked, 77 percent indicated store traffic at or ahead of 2014 totals vs. 85 percent for last year. Roughly 95 percent indicated inventory levels were high.
As for where the best deals were, Deutsche Bank found the deepest discounts at Walmart (WMT) -- with a 27 year-over-year drop in price for a basket of 19 identical products and a 14 percent drop for a basket of 53 products on Black Friday vs. earlier in November.
According to Gluskin Sheff economist David Rosenberg, real gross domestic income (which measures total income received by all sectors of the U.S. economy) accelerated at a 3.1 percent annual rate in the third quarter from 2.2 percent in the second quarter. So pocketbooks are being filled.
The missing piece seems to be a slight dip in measures of consumer confidence over the past month, possibility driven by the terrorist attacks in Paris. As holiday cheer replaces the cold steel of fear, this should improve. Also, consumers have in recent years held off on purchases until late in December -- a battle of wills with inventory-addled retailers -- in an effort to capture better discounts.
It's also worth noting that while overall results were underwhelming there were a few bright spots. Amazon (AMZN) moved some Black Friday deals to November 20. Target (TGT) offered a $100 gift card with the purchase of an Apple Watch. JCPenney (JCP) opened at 3pm on Thursday ahead of competitors at 6pm.
Watch for retailers to ramp up their promotional tempo as the shopping season rolls on, hopefully lifting customer traffic as well as overall sales.