Black Friday and Thanksgiving weekend sales were record-breaking. According to the National Retail Federation (NRF) a total of 226 million shoppers spent $52.4 billion, up from $45 billion last year; a 16% jump. What's more, sales gains were across all categories, if not all retailers.
One the highlights from the weekend were results at Macy's (M) where 40% more people waited outside the company's flagship store in Manhattan's Herald Square. According to Macy's CEO Terry Lundgren, the customer enthusiasm was all part of what he's calling the company's strongest year in a decade.
Macy's results came as no surprise to Michelle Clark, who has Macy's as her top pick in the department store retail space. The retail analyst for Morgan Stanley tells Breakout the company has been knocking the cover off the ball all year long.
"Macy's continues to put up some of the best same-store sales in the department store sector," she says.
As is the case for all retailers, Macy's key to success is being stocked with the right product at the right time. Clark says this year is all about fashion, specifically private label goods attached with celebrity promoters. Basics (underwear, socks, etc.) aren't packing them in, suggesting the supposedly beleaguered American consumer is willing to pay up for hip goods instead of grandmas stuffing stockings with socks.
For those of you who think the well-hyped bargains spell losses for retailers, Clark says that's not the case. "Macy's EBIT (earnings before interest and taxes) margins will grow about 150 basis points points this year," she says. The key to reconciling deep discounts and heavy promotion is an emphasis on private label goods having much higher margins for the retailers than the basics customers are ignoring.
Another winner is Kohl's (KSS) which Clark says is winning with the same private label recipe as Macy's. In contrast, and Clark's least favorite name is JC Penney (JCP) which she says has underspent on stores, an insult to customers regardless of their disposable income level.
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