Black Friday optimism may be misplaced this year: Morning Brief

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Monday, November 21, 2022

Today’s newsletter is up to Brian Socieditor-in-chief and anchor Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Read this and other market news on the go Yahoo Finance app.

Optimism is in the air based on some early Black Friday predictions.

Mastercard SpendingPulse sees Black Friday sales up 15% year-over-year, and Walmart’s US division reported a 3% increase in same-store sales in the fourth quarter.

But the former retail analyst in me thinks that businesses and investors will have a relatively lackluster holiday shopping season for one big reason: inflation remains omnipresent on consumers’ minds.

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So a 15% increase in Black Friday sales is a huge call in a barely growing economy, and Walmart’s outlook is quite aggressive given that Thanksgiving dinner will cost 20% more this year.

Other data supports this view: In a new Goldman Sachs survey, about 55% of respondents said they plan to buy less goods this year due to a difficult macroeconomic backdrop. Some consumers plan not only to buy less, but also to trade down to cheaper price points and quality levels.

Another Citi survey found that all income groups said they planned to spend less, with most respondents citing less money to spend and high fuel and food prices.

Makes sense based on what retail executives tell me.

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“I think we’re going to be operating in a very uncertain environment,” Target Chairman and CEO Brian Cornell told me. “A consumer who is clearly struggling with budgeting and they’re going to be looking for promotions. So that’s what we’re going to prepare for.”

Walmart CFO John David Rainey told me that consumers are “looking for value,” as if to suggest that a shopper will leave an item on the shelf if the value equation isn’t right.

A statue of Santa Claus is seen near a sale sign during Black Friday sales at Eagle Rock Plaza in the Eagle Rock neighborhood of Los Angeles on November 26, 2010.  U.S. shoppers were looking for deals on high-definition TVs and popular toys early Friday.  retailers hoped Black Friday would kick off the best holiday shopping season in three years.  REUTERS/Phil McCarten (USA - Tags: BUSINESS)

A statue of Santa Claus is seen near a sale sign during Black Friday sales at Eagle Rock Plaza in the Eagle Rock neighborhood of Los Angeles on November 26, 2010. REUTERS/Phil McCarten (UNITED STATES – Tags: BUSINESS)

I expect you’ll hear similarly angry sentiments from Best Buy’s earnings call later this week.

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All of this will be discussed in my “Rockin’ Retail Special” broadcast live on Yahoo Finance today at 2 p.m. ET. I’ll be working at Oculus in New York alongside retail experts including former Gap and J Crew CEO Mickey Drexler.

So check out finance.yahoo.com, our YouTube channel, or the Yahoo Finance app for Apple or Android — either way, be sure to pick your retail stocks extra carefully this season.

In the meantime, happy trading!

What to watch today

Economy

Revenue

  • Agilent (A), Dell Technologies (DELL), J.M. Smucker (SJM), Jacobs Engineering (J), Li Auto (LI), Urban Outfitters (URBN), Weber (WEBR), Zoom Video (ZM)

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