Holiday Season: its Clicks over Picks!
It’s that time of the year again when attractive deals and promotions lure customers to stuff their shopping bags. The holiday season has kicked off with Thanksgiving on 24 November, followed by Black Friday and Cyber Monday. The US National Retail Federation (NRF) expects holiday sales this year to grow 3.6% YoY to USD 655.8 bn (barring autos, gas and restaurant sales in November and December). This is significantly higher than the ten-year average of 2.5% and beats the seven-year average of 3.4% since recovery began in 2009. The NRF has also reported that the long shopping weekend from Thanksgiving to Cyber Monday alone has contributed a whopping 15% to this year’s holiday sales.
The NRF forecasts non-store sales (e-commerce and m-commerce) to grow 7–10%, reaching an all-time high of ~USD 117 bn. This year’s Cyber Monday became the biggest online shopping day ever, with online sales at USD 3.39 bn, growing 10.2% YoY; while Black Friday registered the highest mobile revenue at USD 1.2 bn, growing 48% YoY. Total online sales growth (Thanksgiving to Cyber Monday) was 17.7% YoY, while in-store sales fell 1.0%.
Online shopping, along with its benefits of price comparison and higher discounts, has depressed foot-fall in brick-and-mortar stores. However, high shipment costs may still pressurise margins for e-commerce players. Overall, online traffic grew 2% YoY to ~154 mn even though average spending declined 3.4% to USD 289.19. In terms of assortment, traffic was the strongest for electronics (led by TVs, PlayStations, laptops and mobile phones), followed by apparel, footwear and meat (primarily turkey).
Retailers have also prepared themselves well to capture the seasonal upturn. Most saw solid traffic and comparable sales growth. Wal-Mart expanded its online offerings to 23 mn products (from 8 mn last year) with new brands and over 3 000 marketplace sellers. To grab the maximum share of sales, it began offering its Cyber Monday deals two days earlier this year at 12am on Black Friday. Costco also launched early Black Friday deals (online only) for its members and benefited from the larger reach of its new co-branded Visa card (vs. the Amex card used previously). Amazon built 26 new warehouses and increased its workforce by 40% with 120 000 temporary workers (trained by robots to minimise the training time to two days) to support the peak holiday sales.
NRF expects retailers to hire 640k–690k seasonal workers this holiday season, in line with last year’s 675k new holiday positions. Most retailers are thus poised for holiday cheer given sound consumer sentiment and healthy spending on the back of encouraging job and wage growth. Strong credit positions with low debt levels also provide supportive ground for a hearty holiday season.
Only 9% of consumers finished holiday shopping till Cyber Monday, down 200 bps YoY which indicates greater momentum ahead. The leading retailers in our coverage, viz., Amazon, Wal-Mart, Costco and Kroger have already identified the evolving consumer preference for online and mobile channels and are taking significant strides in this direction. Higher sales of electronic goods during the holiday season (mainly TVs, handsets, and laptops) should also benefit the tech majors Apple and Samsung. We expect all six stocks in our basket to make the most of the holiday season.
Data & recommendations as of December 05th, 2016 close
This document is an objective and independent explanation of the content of the recommendation and cannot be considered as adapted to a person or based on the analysis of the situation of a person.