Investors watch retail stocks as U.S. holiday shopping beckons

By Caroline Valetkevitch

NEW YORK, Nov 24 (Reuters) - Investors are zeroing in on a number of hot retailers' shares as the U.S. holiday shopping season kicks into high gear this week, weighing the potential for supply chain problems against expected strong consumer demand.

The day after the U.S. Thanksgiving holiday, Black Friday Link has for years unofficially marked the start of the holiday shopping period and one of the busiest shopping days of the year.

But the ongoing coronavirus pandemic and its effect on supplies have likely driven shoppers out early, as evidenced by a recent Commerce Department report showing U.S. retail sales surged in October.

"We're in a very different place now and for the last two years. Christmas is a four-month season Link starting in October," said Phil Orlando, chief equity strategist and head of the client portfolio management team at Federated Hermes in New York.

Among other trends, the Black Friday Link average promotional discount is lower than in previous years, according to data compiled by Refinitiv and StyleSage Co, a data analytics platform, suggesting consumers may not see the bargains they've seen before.

But analysts have become more bullish on the holiday shopping season, according to data polled by Refinitiv, which noted that discounters, home furnishing and home improvement companies are expected to see among the strongest same-store sales growth.

Many retailers have outperformed the broader market this year. An S&P retail exchange-traded fund XRT.P is up 54% since Dec. 31, compared with about a 25% gain in the S&P 500 .SPX year-to-date.

Refinitiv pointed to a number of companies facing "difficult comparisons" in the fourth quarter versus a year ago, when sales were strong, but that still have upbeat forecasts for this quarter, including Crocs Inc CROX.O , Williams-Sonoma WSM.N , Lowe's Cos LOW.N , Home Depot HD.N , Lululemon Athletica LULU.O , and Target TGT.N .

"Last year they knocked it out of the park, and you're still seeing strong numbers, which suggests that strength and demand for the products are holding up very well," said Jharonne Martis, director of consumer research at Refinitiv.

Among the retailers with the best year-to-day gains are Bath & Body Works BBWI.N , Tractor Supply TSCO.O Autozone AZO.N and Etsy ETSY.O .

Recent earnings reports from retailers have cited problems with supply disruptions and strategists say inventory levels could be a problem for some retailers this shopping season.

This week, Gap Inc. GPS.N lowered its full-year forecast amid supply chain disruptions including factory closures, and its stock plunged about 23% on Wednesday.

Last week, Walmart Inc WMT.N raised its annual sales and profit forecast but global supply-chain disruptions hit its margins in the third quarter.

Online spending will be strong again this holiday season, the Refinitiv analysis also showed, so all eyes will be on AMZN.O .

"Online is going to rule the day," Orlando said, and he said overall the companies that are likely to do better this season are the ones that have been able to find a way around supply logjams, such as Amazon, and possibly Target, Walmart and Costco COST.O .

Shares of big department stores that typically draw heavier traffic during the holidays also will be closely watched, including Macy's M.N , Kohl's KSS.N and Nordstrom JWN.N , as well as companies with consumer brand favorites, like Apple AAPL.O .

Macy's M.N signaled last week that it was well stocked for the holiday season.

PREVIEW-Santa Claus is coming to town – but at what cost to
Walmart and Target?

Gap cuts annual forecast amid supply chain woes, shares slide 19%

INSIGHT-'Containergeddon': Supply crisis drives Walmart and rivals to hire their own ships

With U.S. inventories tight, 'Black Friday' drags through November

Nordstrom beats revenue estimates on strong apparel demand American Eagle Outfitters holiday inventory balloons, sales impress

Walmart stock tumbles as supply chain snarls hit margins ahead of holidays

Amazon's holiday-quarter forecast disappoints as labor, supply issues mount

Retail performance YTD Link

Reporting by Caroline Valetkevitch; Editing by Alden Bentley and Nick Zieminski

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.