Here Come the Holidays – the Market Outlook for Retail
What is the Retail Market Outlook for the Holiday Season?
Market volatility and declining economic conditions in many countries have made retailers less than optimistic in their predictions for the holiday shopping season. Many companies depend on the holiday season for a significant portion of their annual revenue. Historically though, retail stocks have underperformed the S&P 500 when compared to the S&P 500 Retailing Index. USA Today analysis reports that fact has held true for three of the past five holiday shopping seasons.
Trends which are unnerving to investors in retail markets include recent disappointing earnings reports from retail giants such as Nordstrom and Macy’s. Nordstrom reported earnings 26% below expectations and Macy’s had similar bad news for investors with missing their expected results. Even with J.C. Penney’s positive report that their losses were less than had been predicted, it’s not much comfort to shareholders who are still met with a loss and declining prices. Results from each of these leading retailers add to the concern of shareholders and fears of a disappointing holiday season from a portfolio viewpoint.
Game retailing giant Gamestop likewise suffered a drop in value in excess of 16% partly due to industry analysis reports that store-front software sales are in a declining position. Game developers have made it consistently more convenient and affordable to simply download and purchase games and videos online.
Retail Market Outlook Trends
One of the shopping traditions of the holiday season has been the phenomenon of Black Friday – the Friday after Thanksgiving in the US. Shoppers converge on stores that open early in the day or even late on Thanksgiving Day with “door buster” specials that lure consumers into their stores en masse.
But the National Retail Federation (NRF) reports that consumers invading retail stores were down by over 5% last year, and sales were down by 11% over that 4-day weekend shopping period. Overall Black Friday consumerism has been trending down. Some companies are even publicizing the fact that they will be giving their employees Black Friday off for focusing on healthy outdoor activities, even shutting down online ordering sites that day. This constitutes a benefit for employees and perhaps a brilliant marketing strategy.
Economic conditions in China still concern some investors due to the impact to consumers and businesses in those markets.
Is There Any Good New on the Retail Market Outlook?
If it’s any consolation retail stocks beat the S&P 500 last year as they increased by over 3% as the S&P 500 declined. Oil prices are still trending at low levels that provide consumers with expendable income and employment in the US has also been showing improvement in recent months.
While Nordstrom did experience less-than-expected results partly due to reduced prices through markdowns to move inventory, the upside is that the inventory cleanout can put them in a better position for the holiday season.
Certain products will almost certainly be popular especially among younger shoppers including televisions, smartphones, and other electronics and big-ticket items. These same shoppers will always have room for purchases of typical gifts such as sweaters and other apparel items. Gifts that can be easily packaged in a box and wrapped will always have their share of demand for holiday shoppers.
Applying the Retail Market Outlook to Your Investment Strategy
Applying analysts’ observations to your investment strategy can get you the results you’re looking for. Opportunities are always there during both up and down markets. Of course when day trading timing is essential so use your online broker’s tools to your advantage in making buy and sell orders.
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