In the month of November, the first and only thing on every shopaholic’s mind is Black Friday. It’s a day of crazy sales and mad purchasing that has taken the retail sector by storm every year with a few mandatory stampede-related deaths to top it off!
Despite Black Friday deals everywhere, marketers have still found space for another shopping bonanza. If Black Friday tests the foundations of a brick-and-mortar business, Cyber Monday tests the weight of its online presence. Instead of creating interstate traffic, this second money-fritting wave creates internet traffic!
However, behind the superficial buying spree lies some extremely important data for investors. Black Friday originally gained its name from the fact that the retail sector makes between 30-40% of its annual sales in a single month, from the 23rd of November to Christmas – enough to push them into profitability or “into the black”.
Investors use the data retrieved from Black Friday and Cyber Monday sales to get a measure of the overall health of the retail sector and analyse it to potentially forecast future sales in the holiday period to come. Leading up to these events, markets start to anticipate certain outcomes from retailers and whether they will have good or bad sales, causing stock prices to move around in response.
This year, it’ll be a clash of titans with the pressure on Amazon to keep Walmart at bay. The latter has merged both online and offline, so it should show up to play big on both Friday and Monday. Analysts are also bullish on Best Buy, another old school retailer. They reckon it’ll live up to its name after raising profit guidance, but Kohl’s has done the opposite and may struggle. In fact, investors will have to duck and swerve a myriad of retail bankruptcies. L Brands, Bed Bath & Beyond, The Gap, and JC Penney, all need to pull a rabbit out of the hat!
When it comes to trading around specific events, such as Black Friday, it’s all about expectations. A company that beats sales expectations will see a major rise in its stock price, whilst one that underperforms expectations will see a major decline in its price.
Traders will look to profit off these short-term movements and try to pick the best outperforming retailers before Black Friday and Cyber Monday hit then use that data as a “leading indicator” to predict where the next price surges will be over the holiday period.
Target, making huge market strides, will swing open its doors as Wall Street’s favorite. Apple will join in the fun with electronics sales and even extending beyond traditional retail, mobile networks, restaurants, salons, and spas will participate as well. Luxury designer deals on Black Friday? No chance, discounts kind of spoil the appeal.
Make no mistake that in this retail climate, playing the markets will be like trying to catch a falling knife! Get ready to storm the stores, click away online or trade the markets furiously to get your piece of the Black Friday action!