Per the bank’s channel checks, Lululemon’s (LULU) traffic was “a clear standout across the mall” with long lines apparent at locations visited despite fewer discounts available. Additionally, strong sales at the core Victoria’s Secret (VSCO) was credited for offsetting significant deceleration evident for the retailer’s PINK brand. Finally, American Eagle Outfitters (AEO) and Abercrombie & Fitch’s (ANF) core brand were called out for strong foot traffic and online sales for the Black Friday holiday.
“In our view, this means these retailers’ assortments likely resonated with consumers & allowed these banners to drive relatively more profitable Black Friday revenue,” the team commented.
By contrast, Abercrombie & Fitch’s (ANF) Hollister brand as well as The Gap’s (GPS) flagship and Banana Republic brands were cited as “relative losers” for the retail sales day. The weak traffic for the brands came despite deep discounting, arousing caution on both Q4 sales and margins for each of the retailers.
“Looking ahead post-Black Friday, we worry consumers may hold-out on further holiday spending/shopping until retailers once again offer deeper discounts. Historically, when we have seen consumers hesitate to spend while retailers are overstocked with inventory, retailers have often reacted first, slashing prices on goods to clear out excess stocks,” the team concluded. “In our view, this means discounting activity could worsen over the next 5 weeks. This would yield outsized margin pressure, & keeps us cautious on the outlook for retailers’ profits this holiday season.”
Elsewhere, Walmart (WMT) and Five Below (FIVE) were cited as retailers seeing higher than usual traffic levels, while Ulta Beauty (ULTA) saw slower traffic. Target (TGT) was “most surprising” for the team as traffic remained muted despite the discounts offered. The earlier start for holiday sales was cited as a possible factor in lower consumer interest in Black Friday deals specifically.
Read more on discounting concerns across softlines retail.
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