What’s happening: Investor focus will remain on US retail stocks today, even after the rally on Wednesday ahead of the great Thanksgiving shopping week.
What happened: Black Friday kicks off the all-important US holiday shopping season. Investors are eager for reports on how retailers fare on Black Friday and Cyber Monday, with this being the first real indicator of their expected performance in December, a month that generates almost 20% of total annual revenues for retailers.
While households look forward to attractive Black Friday deals, investors will be on the lookout for the best retails stocks to invest in the holiday season.
Why it matters: While shoppers may not be camping outside popular retail stores waiting to grab the best bargains this year, there has already been a surge in online shopping by Americans. Investors have added retail stocks to their portfolios and sentiments remain bullish about massive Black Friday and Cyber Monday sales, despite the resurgence of covid-19 cases in many parts of the country.
The NRF (National Retail Federation) recently said it expects holiday sales to increase between 3.6% and 5.2% in November and December, despite the current economic crisis. The agency also projected holiday spending between $755.3 billion and $766.7 billion this year.
With holiday shopping growing by an average 3.5% every year over the past five years, markets expect 2020 to be no different, other than the sales being generated online. While Verizon's Business Retail Trends data shows an 82% spike in online shopping traffic through the first week of November this year, the NRF has projected a 20% to 30% increase in online and non-store sales this holiday season.
Amazon is likely to be among the main beneficiaries of this trend. The ecommerce giant, which had hired more than 25,000 people across its warehouses earlier this year, has added another 100,000 seasonal workers for the shopping season. Retailers that have recently expanded their online presence, like Walmart, Target and Home Depot, may also benefit from the higher sales.
Investors have extended their support to other ecommerce stocks like eBay and Etsy, expecting them to report high holiday season sales this year. In fact, some mall-based retailers, like Macy’s and American Eagle Outfitters, also saw their stocks spiking on Wednesday.
Investors are also focusing on some stocks outside retail. Delivery companies, like FedEx and United Parcel Service, as well as online payment processing firms like PayPal, may also benefit from the surge in online sales.
What to watch: Investors will keep an eye on the sales during Black Friday and Cyber Monday. Markets will also monitor how well the retailers handle the incoming swarm of orders and execute on services like curb-side pickup and expedited deliveries.