Looking for data to support the Black Friday hype
2012 has been the Year of the Black Friday Skeptics. Weeks ahead of the event, commentators began to voice their skepticism about the most over-hyped retail promotion of the year. The momentum had been building during the past few years. People began to question the validity of the data. How does “foot traffic” in stores translate into sales? Why is it even relevant? The immediate sales figures quoted by retailers – conveniently high enough to boost enthusiasm at the onset of the holiday shopping season – end up being revised downward, once the actual sales results are made available to sober-minded, clear-thinking economists.
This year we saw the usual news footage of massive crowds lined up to buy items which would likely be sold out by the time the herd entered the store. More than a few commentators were comparing these scenes to zombie movies. Of all those people standing in line – how many actually planned on buying anything once they got into the store? How many of those people were simply satisfying the need to participate in a media event? How many of those same people regularly appear at impromptu memorial shrines for dead celebrities – simply to participate in a media event? Are surveys based on shoppers’ expressed intentions to make purchases actually valid data?
The leading authority on Black Friday “retail foot traffic”, ShopperTrak, validated some of the concerns voiced by the skeptics this year. ShopperTrak admitted that although foot traffic had increased on Black Friday, actual sales decreased:
ShopperTrak, the world’s largest counter of retail foot traffic, estimates that, when compared to Black Friday last year, retail foot traffic rose 3.5 percent, to more than 307.67 million store visits. Retail sales decreased 1.8 percent, however, with shoppers spending an estimated total of $11.2 billion yesterday.
The report made note of the fact that because many of the sales began on Thanksgiving Day this year, the amount spent on Black Friday was reduced.
Research conducted by Capital Economics revealed that a successful Black Friday for the retail industry is no guarantee that the remainder of the holiday shopping season will continue to bring the same robust results:
We would warn against reading too much into the performance of retail sales on Black Friday as there is little evidence that it will set the tone for sales during the whole holiday season. More generally, the threat of a sharp fall in after-tax incomes on 1st January may restrain sales over the holiday period. Fiscal Cliff 2013
From the investors’ perspective, the question arises as to whether stock market performance on Black Friday could signal a trend for the remaining days of the year. Mark Hulbert investigated the matter, going back to the early 1980s, when the term “Black Friday” found its way into the American lexicon. Hulbert’s research actually revealed an inverse correlation between the performance of the Dow Jones Industrial Average on the Friday and the Monday after Thanksgiving compared with the remainder of the year. In light of the fact that the Dow was up 1.35 percent at the close of Friday’s session, a bullish Monday might cause one to rethink one’s trading strategy for the next month. Stocks Go Deep Black on Black Friday
Here are the results obtained by some of the consumer-oriented ETFs on Black Friday:
SPDR S&P Retail ETF (NYSEARCA:XRT) +1.61%
Consumer Discretionary SPDR ETF (NYSEARCA:XLY) +1.27%
Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) +1.48%
Market Vectors Retail ETF (NYSEARCA:RTH) +1.20%
Bottom line: Black Friday usually provides us with an abundance of data, prepared in haste and subject to the inevitable revisions. Those investors who maintain the patience to await more accurate data will likely realize better gains than the “panic buyers”, caught-up in the excitement of the moment.