The Exchange

Here’s the Real Reason Stores Will Open on Thanksgiving

The Exchange

In staying open over the Thanksgiving holiday, retailers are just giving customers what they want.

Yeah, right.

As the inevitable holiday shopping creep spreads to Thanksgiving Day, stores that plan to open on the holiday, including Kmart (SHLD), Walmart (WMT), Target (TGT) and Best Buy (BBY), say they’re merely responding to consumers who would be shopping online if they didn’t have the option to hit the stores. That’s part of it, no doubt, but an examination of retailers’ financial numbers reveals another reason: Many of them are underperforming and desperate for every dollar of sales. And virtually all those stores will be open on Thanksgiving.

Here’s a breakdown of financial numbers for several prominent retailers:

View photo

.

 

The final column, EPS growth over the past 12 months, may tell us the most about how each company is doing relative to its competitors and investor expectations. Nordstrom (JWN) and Costco (COST), which will be closed on Thanksgiving, are performing notably better in this regard than most of the other chains. The other two retailers we've included that will be closed on Thanksgiving — P.C. Richard, a northeast appliance chain, and BJ’s Wholesale, a warehouse club — are privately owned, so we don’t know much about their numbers. But there are other signs those chains are doing quite well, such as an aggressive expansion plan at P.C. Richard and a recent note by Moody’s on BJ’s debt that praised the company’s “excellent operating performance.”

Many of the chains opening on Thanksgiving Day, by contrast, have endured negative EPS growth during the past year. And three of those have gone from a negative EPS number last year (indicating a loss) to an even worse EPS number this year. (In the table, those companies have a † in the EPS column.)

Traditionalists, predictably, have been venting about retailers “ruining” Thanksgiving, while praising stores that honor the holiday by staying closed. P.C. Richard has taken advantage of the humbuggery by running ads showing a gloomy family trying to eat a turkey dinner on a blanket, in the cold, while waiting in line for a store to open. “We believe Thanksgiving should be spent at home,” the narrator intones.

The lucky class

Yet the numbers suggest a lucky class of retailers will stay closed on Thanksgiving simply because they can afford to. The unlucky openers, by contrast, can’t risk losing a single dollar of sales to a competitor. “If you were the CEO of a retailer that wasn’t doing well and you didn’t open on Thanksgiving, you might as well not even come to work on Friday,” says Marshal Cohen, chief industry analyst at research firm NPD Group. “If you’re doing well and you don’t open, no big deal. Not everybody has to open.”

The minute-by-minute retail arms race is an even bigger challenge for stores that appeal to consumers primarily because of price, such as Kmart, Walmart and J.C. Penney (JCP). “The last thing a value-oriented retailer wants is you being able to find the same item someplace else at a lower price,” says Cohen. That may explain why Gap Inc. (GPS) plans to open most of its low-priced Old Navy stores on Thanksgiving, but only about one-third of its more upscale Gap stores.

Luxury retailers such as Nordstrom don’t typically offer Walmart-style doorbuster specials meant to draw hordes of shoppers; they rely instead on high-quality merchandise and a refined shopping experience to drive sales. If Nordstrom did open on Thanksgiving, its customers — er, sorry, clientele — might even disapprove of such tawdry tactics, costing the chain more in goodwill than it earned in sales. And wholesale clubs such as Costco and B.J.’s have already snagged bargain-hunters by persuading them to pay an annual fee for the privilege of shopping there, which means those shoppers will be back, if only to get their money's worth.

The whole idea of Black Friday/Thursday/Wednesday might be a dying concept anyway. Now that retailers have breached the Thanksgiving barrier en masse, there’s nothing stopping them from moving the people-moving come-ons to the weekend before, effectively moving Black Friday up by a week or so. Walmart has already done that, with a new pledge to match competitors' Black Friday deals a week early. Others can only follow, which might ultimately satisfy evreybody, since retailers would get even earlier holiday sales and Thanksgiving would no longer be such an important shopping day.

This year’s disruption to your turkey dinner may only be temporary.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman .

View Comments (2148)