Will Consumers Bite the Bullet on Black Friday?

By Kevin Grewal

As Thanksgiving is right around the corner, the nation’s single busiest shopping day is about to unleash, the question of whether or not the retail sector will get a boost this holiday season is unclear.

Most retail industry experts expect large turnouts on Black Friday, as many are expected to offer exceptional deals and have tailored their offerings to the penny pinching consumer.  Wal-Mart (WMT) is offering consumers a $100 gift-card with the purchase of a $199 Nintendo WII, while Best Buy (BB) and Office Depot (OD) are advertising netbook computers, with the new Windows 7 software, for under $300 and Target (TGT) is expected to offer some home appliances for as little as $3 a piece.  

To further support the notion that retailers will see a bump in sales, some experts suggest that consumers have had more than a year to adjust their spending habits, cope with the weak economy and put a holiday shopping plan together.  Additionally, over the past few months, research and the trends of the retail sector have indicated that it is starting to stabilize, especially compared to last year’s holiday season, which was just weeks after the financial crisis erupted.  Lastly, many retailers have made it easier for consumers to purchase big ticket items by offering extended layaway plans and earlier sales.  A combination of these factors, has led the International Council of Shopping Centers to forecast a 1-2% rise in holiday season sales.

Those who are looking at the glass as half empty are suggesting that factors like rising unemployment and an unstable economic outlook will cause consumers to remain cautious and refrain from impulse buying.  Additionally, they are suggesting that special promotion sales, put together by retailers earlier in the year to spark consumer spending, may have an adverse affect and on Black Friday revenues in that some consumers have  already made their big purchases for the year.  This has lead organizations like the National Retail Federation to suggest that revenues for the holiday season are likely to decline.

At the end of the day, there will be a lot of traffic in and out of retail stores on Friday and a lot of good deals to capitalize on.  Whether or not consumers will actually let go of their wallets and splurge, only time will tell.

Some equities that will likely be influenced by Black Friday are:

  • SPDR S&P Select Retail ETF (XRT), up 93 % from a March low of $18.27 to close at $35.17 on Monday
  • Merrill Lynch Retail HOLDRs (RTH), closing at $94.59 on Monday after seeing a March low of $61.26; an increase of 54%
  • SPDR S&P Select Consumer Discretionary (XLY), up 80% from a March low of $16.11 to close at $28.94 on Monday.

When investing in equities, it is important to keep in mind the inherent risks involved.  To help mitigate these risks, an exit strategy is important.  According to the latest data at, an upward trend in the aforementioned ETFs could come to an end at the following price points: XRT at $33.71; RTH at $90.83; XLY at $27.61.  These price points change on a daily basis as markets fluctuate and updated data can be found at

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s