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Forecasts were all gloom and doom for Black Friday, with the media predicting a huge pullback in consumer spending. But on Monday, numbers were released showing that shoppers had actually increased their spending over the same period last year. Many media outlets are still predicting less shopping in the weeks before the holidays and spending was way down leading up to Black Friday, meaning the boost may not do much to help ailing retailers.
(Overall, November sales likely dropped about 2%, according to Retail Metrics, a research firm. That is the biggest monthly decline since the company began tracking data in 2000.)
So while there was an increase in spending over the long weekend including Black Friday, you'd hardly know it. After touting predictions of a shopping slump, media outlets seemed loathe to report that they were wrong about consumers' spending habits on Black Friday. Instead, the focus has been on the expected slower sales for the next few weeks, which may turn out to be completely accurate, but we're not in the business of predictions. (In case you didn't know, Black Friday is so named because it's traditionally the day that retailers go from being in the red to being in the black. The name is no indication of the day's apoplectic-sized shopping spree.)
More people were out shopping this year on Black Friday and the weekend after, with 172.9 million people venturing to the stores versus 147.3 million last year. The shoppers who were out spent more, too, an average of $372.57 this year versus $347.55 last year. But there was one statistic that indicated the media might be right about less spending in the coming weeks. This year, 10.6% of people said they completed all holiday shopping this weekend, up from 8.2% last year.
But the increase in spending may not be enough to rescue some retailers. Already Linens-N-Things, Circuit City and Sharper Image are going out of business, while Footlocker, Wilson's Leather, Home Depot, Ann Taylor, Zales and Pier 1 Imports have announced that they are closing some of their stores. More big name firms are sure to follow, but the pickup in spending should help, at least for a few days.
My own personal experience seemed to indicate fewer people were out shopping, although I didn't recover from my turkey hangover until about 1 p.m. on Black Friday and thus missed the mad rush in the early morning hours. I did see people out buying gifts, but they were mostly purchasing items that were 30% to 70% off ... nearly four weeks before Christmas!
Most remarkable was that the local Wal-Mart parking lot was less than half full (typical for a normal weekend day) and I could actually navigate the aisles. I was expecting to be crushed by a mob, but found that the store wasn't really any more crowded than it usually is during tourist season in our small hamlet of New Hampshire.
What shocked me most on Black Friday occurred at a Wal-Mart on Long Island where a man was trampled to death by early morning shoppers. Seriously. I think this is a clear indication that the "holiday spirit" has been replaced by media-hyped consumerism and materialism. This also means that it's probably safest to shop online and avoid the mall at all costs. This incident reminded me of a few years ago when parents were beating each other up during the Tickle-Me-Elmo shortage.
While I understand that times are tight for many people and those that are out shopping are trying to get the best deals possible, the truth is, there's plenty of stuff to go around. And if something doesn't get purchased, it likely won't ruin Christmas, but the family of the man who was killed definitely had their holiday ruined by this tragic event.
Takeaway message: No deal is worth someone's life. Not even a $99 GPS or a half-price flat-screen television. Now that's something to teach the kids this holiday season.
What was your Black Friday shopping experience? Did you brave the crowds or stay home and shop online or not spend at all? Tell us by email or on our blog, http://www.iconoclast-investor.com
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If you're looking for an investment idea, here's one that takes advantage of shoppers' growing preference for discount retailers. We've written about a few stocks in this area that look promising right now and below I've reprinted an updated version of what Michael Cintolo wrote last week about one of these investment opportunities.
"With the economy bad and likely to get a lot worse (the leading economic indicators are all shouting severe recession), retail stocks have been crushed, especially those that offer discretionary (read: expensive) items. Any company selling HDTVs or fancy jewelry or expensive apparel has seen its stocks crushed in recent months.
"However, the pain being felt by those companies is benefiting many discount retailers--those that sell basic goods and services at bargain basement prices. One of the best of the bunch is Dollar Tree (DLTR), which was featured in Cabot Top Ten Report on November 3 and again last Monday, where we wrote:
"Discount retail remains in favor, and Dollar Tree is one of the leaders in the group, making its second appearance in Cabot Top Ten Report in the past month. The company operates 3,500 deep-discount stores across the country, selling a bunch of basic consumables (beauty products, candy, decorations, toys and so on) for about a buck each. The overall story might not be sexy, but it's simple: Consumers, even those with money to spare, are cutting back, with many going to discount locations to pick up necessary items. Dollar Tree's earnings report last week confirms that trend--revenues rose a solid 12%, while earnings advanced 24%, ahead of estimates and miles ahead of its general retail peers. That pushed the stock toward new-high ground, and led to estimate hikes across the board. It's not going to be a big winner, but it should do well in this environment."
"Dollar Tree is not a great growth company--it's not the next Apple (AAPL) or First Solar (FSLR). But it is in the right place at the right time, I believe the stock can bring you profits if the market's bounce can turn into something longer lasting."
The only hitch right now is that some of Dollar Tree's peers (like Family Dollar Stores (FDO) and Casey's General Stores (CASY) are coming under pressure in the market--and that weakness could spread to DLTR. Still, overall, the story is sound, and, like Mike wrote, the company is in the right place at the right time.
In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, we have links below to each issue.
Cabot Wealth Advisory 12/1/08 - The Sport With No Spectators
On Monday, Timothy Lutts wrote about how you can have you child's DNA tested to see whether they're going to be a future Olympic athlete or a world-class couch potato. Tim discussed his worries about how the test might limit the sports kids are exposed to and how it might bury little-known sports even more. Tim also wrote about one of his favorite genetic medicine stocks. Featured Stock: Myriad Genetics (MYGN).
Cabot Wealth Advisory 12/4/08 - Thanks for the Stock Tip, Doc
On Thursday, Paul Goodwin wrote about how a stock tip from his doctor helped him think like a contrarian investor. Paul discussed how to determine the number of shares you should buy when investing in a stock. Paul also wrote about a Chinese dairy stock for your Watch List. Featured Stock: American Dairy (ADY).
Cabot Wealth Advisory 12/5/08 - Is the U.S. Finished?
On Friday, Timothy Lutts wrote about two schools of thought on whether the U.S. has seen its best days or whether there are better days ahead. Part of this depends on the education system in the U.S., where the list of most-watched TV shows may be entertaining but somewhat lacking in educational value. Tim wrote about a stock that's benefiting from the increasing trend in adult education. Featured Stock: Apollo Group (APOL).
Until next time,
Editor of Cabot Wealth Advisory
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P.S. In the above article, I wrote that Disney is closing some of its stores, and while this has been reported many places, I have since discovered that this information is simply not true. Here's a statement from the president of the company, Jim Fielding: "Disney Store has no current plan or announcement to close 98 Stores. This is inaccurate information that has been circulated via the Internet.”