Black Friday optimism may be misplaced this year: Morning Brief

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Monday, November 21, 2022

Today’s newsletter is up to Brian Sozzieditor-in-chief i anchor in Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and so on LinkedIn. Read this and more market news on the go Yahoo Finance App.

Optimism is in the air, based on some early Black Friday projections.

Mastercard SpendingPulse sees Black Friday sales up a strong 15% year-over-year, and Walmart sees a 3% increase in same-store sales in the fourth quarter.

But the former retail analyst in me thinks businesses and investors will have a relatively muted holiday shopping season for one big reason: Inflation remains omnipresent on consumers’ minds.

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Consequently, a 15% increase in sales on Black Friday is a huge call in an economy that is barely growing, and Walmart’s outlook is quite aggressive given that Thanksgiving dinner will cost 20% more this year.

Other data supports this view: In a new Goldman Sachs survey, roughly 55% of respondents said they plan to buy fewer items this year as a result of the challenging macroeconomic situation. Some consumers plan not only to buy less, but also to trade down to lower prices and quality levels.

Another survey by Citi found that all income brackets indicated they planned to spend less, with the largest percentage of respondents citing less money to spend and high fuel and food prices.

It makes sense based on what the retail executives are telling me.

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“I think we’re going to be operating in a very uncertain environment,” Target Chairman and CEO Brian Cornell told me. “The consumer who is obviously facing budget management challenges and will be looking for promotions. So we’re going to prepare for that.”

Walmart CFO John David Rainey told me that consumers are “looking for value,” as if to suggest that a customer will leave an item on the shelf if the value equation isn’t right.

A statue of Santa Claus is seen near a sale sign during Black Friday sales at Eagle Rock Plaza in the Eagle Rock neighborhood of Los Angeles November 26, 2010. U.S. shoppers were looking for deals on high-definition televisions and popular toys early Friday as retailers hoped Black Friday would kick off the best holiday shopping season in three years.  REUTERS/Phil McCarten (UNITED STATES - Tags: BUSINESS)

A statue of Santa Claus is seen near a sale sign during Black Friday sales at Eagle Rock Plaza in the Eagle Rock neighborhood of Los Angeles November 26, 2010. REUTERS/Phil McCarten (UNITED STATES – Tags: BUSINESS)

I think you’ll hear equally sharp vibes from Best Buy’s earnings later this week.

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All of this will be on the table for discussion on my “Rockin’ Retail Special” airing live today on Yahoo Finance at 2:00 PM ET. I’ll be based at Oculus in NYC with an all-star mix of retail professionals, including former Gap and J Crew CEO Mickey Drexler.

So tune in at finance.yahoo.com, our YouTube channel, or the Yahoo Finance app for Apple or Android — either way, be sure to choose your retail stocks carefully this season.

In the meantime, happy trading!

What to watch today

economy

Earnings

  • Agilent (AND), Technologies Dell (DELL), JM Smucker (SJM), Jacobs Engineering (J), Li Car (LI), Urban Outfitters (URBN), Weber (WEBR), Zoom Video (ZM)

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