When Black Friday comes, will consumers spend?

Early indicators show that Black Friday could be a hit for retailers. Will the rest of the holiday season follow suit?

By Jonathan Berr Nov 23, 2011 1:57PM
Image: Woman with shopping bags (© Tanya Constantine/Getty Images)Shoppers are already camped out at stores across the country in hopes of landing the best Black Friday deals.  

Retailers are hoping that their enthusiasm signals a strong performance for Black Friday, the traditional start of the holiday season. The National Retail Federation recently said that more Americans say they plan to shop for Black Friday bargains than last year. Consumer confidence rose in November to its highest level in November to its highest level in five months.

Best Buy (BBY), for one, needs all the help it can get. The nation's largest electronics chain has been struggling amid continual declines in same-store sales. In September, it reported a a 30% fall in its second-quarter net income.  

Shares of the Minneapolis company have been crushed this year, tumbling more than 25%. It's no wonder that Best Buy decided to begin its Black Friday sales on midnight on Friday despite the negative publicity.

Wal-Mart (WMT) is betting the holiday season will help its U.S. business continue to rebound. Sales in Wal-Mart's home market jumped 2.7% to $63.8 billion in the quarter ended Oct. 31 as consumers were attracted to its low prices and holiday layaway program, which Target (TGT) has said was costing it business. Target, though, is doing fine. Third quarter same-store sales rose 4.3%, the biggest gain since 2007. That momentum should continue during the holidays.

Other Black Friday winners include discount retailer TJX (TJX), whose CEO Carol Meyrowitz recently said, "Although it’s still early, November is off to a strong start." Macy's (M) also should do well. The company raised its full-year outlook earlier this month. High-end retailers are also doing well. For instance, Coach (COH) bag and accessory sales rose about 13% in North America during the most recent quarter.

Among the companies that may struggle are Urban Outfitters (URBN), whose fanciful fashions have turned off shoppers. Sears Holdings (SHLD) recently posted worse-than-expected earnings and gave lackluster earnings guidance.Amazon (AMZN) spooked investors by reporting disappointing third-quarter profit and by forecasting a decline in fourth-quarter results as it hiked spending to fuel expansion plans.

One thing is for sure: There will be plenty of bargains to be had for the shoppers that can afford them.

--Jonathan Berr owns shares of Target.  Follow him on Twitter @jdberr.

 
 
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