The Black Friday start to the crucial holiday shopping season has been mixed at best, and that means there are some distinct early and winners and losers, analysts say.
"Lululemon, A&F banner, American Eagle Outfitters, and Victoria’s Secret banner emerged as the biggest winners this Black Friday, while Hollister, Gap banner, & Banana Republic were relative losers, in our view," the Morgan Stanley retail team led by longtime analyst Kimberly Greenberger wrote in a recent note.
According to Morgan Stanley's findings, the winning retailers had a few key trends play out on the long holiday weekend.
"These strong traffic results were achieved despite 1) similar or lower year over year discounting levels, and/or 2) discounting activity below total sector averages," the analysts said. "In our view, this means these retailers’ assortments likely resonated with consumers & allowed these banners to drive relatively more profitable Black Friday revenue."
As for the losing retailers, the analysts added that they were handed weak store traffic at a time of increased discounting, which may ultimately lay the foundation for poor fourth-quarter profits.
By and large, retailers are off to a so-so beginning to the holidays as consumers balk at inflationary prices for merchandise and spend more on experiences such as dining out and travel.
Adobe, which tracks online purchases, said Black Friday weekend spending rose 4.4% from the prior year to $9.5 billion. For the holiday season to date (Nov. 1 to Nov. 27), consumers have spent $96.42 billion online, up only 2.1% year over year.
"The holiday weekend data points from industry sources seemed in-line to positive overall with online growth outperforming store performance," Citi retail analyst Steven Zaccone noted, echoing the mixed data out of Adobe and Mastercard. "Our specific field work showed in-store traffic was a bit underwhelming as most store associates spoke to traffic down year over year."
Zaccone called out increased promotional intensity at Best Buy (BBY), leading him to reiterate a Sell rating with a $72 price target on the stock.
"Consumers were more targeted with their store visits vs. casual browsing and likely prioritized online shopping for bargain hunting," Zaccone added on the retail sector more broadly. "Promotions from our retailers looked flattish-to-slightly deeper year over year."