Ah, Thanksgiving. A time to reflect upon our blessings, and formulate a battle plan for the annual assault on the retail redoubts and capture of the prized discount. While many of us lament the intrusion of crass commercialism into our cherished family rituals, the fact is that Thanksgiving is inexorably linked to the commencement of the holiday shopping cycle. Black Friday (now Thursday night) is the shoppers' equivalent of the first day of deer season.
This year is shaping up to offer the biggest treats for bargain hunters in recent memory, thanks to a fortuitous confluence of factors. Industry analysts predicting modest increases in spending over last year could be pleasantly surprised.
Photo — Please put this mug shot of Chris Hopkins of Barnett & Co. in our system to use every other Wednesday when it will run with his column.For starters, American consumers are in better shape this year. Unemployment has finally sunk to 5 percent from 10 in 2009. Meanwhile, new claims for unemployment benefits, a proxy for layoffs, are running near four-decade lows. And real wages have finally begun to migrate higher after years of stagnation. Add to these positive tailwinds the fact that households have substantially reduced their borrowing and are now less indebted on average than at any time since the 1980s. Consumers have rightly been cautious since the Great Recession, but we are, after all, Americans and therefore congenitally disposed to consume.
Then there is the matter of gas prices. The much-anticipated peace dividend attendant to the end of the global energy war with OPEC has yet to materialize, but it may yet. A typical family is now spending between $500 and $1,000 less per year filing the tank. So far, the difference has gone mostly into savings or debt reduction, but a bit of splurging this Holiday season in celebration of cheaper gas would not be surprising.
On the other side of the ramparts, merchants are strategizing not about whether but rather how much to discount. Third-quarter reports from most of the major retailers were almost universally disappointing to investors, both in terms of last quarter's sales as well as reduced expectations for Christmas. Many of the big retail stocks tumbled double digits following the tepid results and are off by 25 to 40 percent year to date. Now it is catch-up time, and given that holiday sales represent about a third of the year's total, expect aggressive discounting to blow out excess inventory and boost revenues before year-end. More good news for buyers.
Which brings us to Black Friday. Recent surveys have demonstrated less enthusiasm for the dehumanizing crush of 4 a.m. doorbusters and limited-quantity loss leaders. This year, consumers will call the tune, as bargains abound throughout the holiday shopping season on-line as well as in the stores at the same prices (so-called "omnichannel" sales). Retailers must still compete aggressively, but seem likely to do so in a slightly more civilized manner throughout the season on the Internet and inside the big box.
And while on-line sales are growing at double-digit rates, the death of brick-and-mortar stores is much exaggerated. Interestingly, the most on-line generation, known as millennials (roughly age 18 to 35), also are the most likely to forego the post-turkey nap and hit the malls in person, according to the National Retail Federation. This is encouraging, as the millennial generation is now the largest single population cohort in the work force and will drive retail trends for the next 20 years.
Like it or not, shopping on Thanksgiving weekend is every bit as American as pumpkin pie. And this year could prove to be better than expected, something to be thankful for.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.