Will Black Friday Weekend Sales Grow 15%?

Includes: XLP, XLY
by: Chandrasekhar Rajagopalan

Retailers have lined up different schemes to attract consumers in the upcoming Black Friday weekend. The National Retail Federation, or NRF, is expecting 4.1% growth in retail sales in the current year's holiday season. While this growth is for the period up to December or the first week of January, the immediate focus is on how sales will shape up in the forthcoming black Friday weekend. Retail sales could register 13% - 15% growth if the rough calculations using various methods are correct.

The upcoming weekend will likely see 147 million shoppers, according to a NRF estimate. This is slightly below the last year survey of 152 million. However, the actual number of visitors was 226 million in 2011. This means a difference of about 48.7% more shoppers between the pre-survey and the actual shoppers. A similar pattern of a rise in the actual number of shoppers in the current year is also more likely, given the consumer confidence level and jobless claims.

We arrive at some potential scenarios using a review of past performance and the calculation of revenue generation through different methods. For instance, the retailers witnessed a sale of $563 billion in 2011 holiday season, and the total spending during the black Friday weekend accounted for $52.5 billion. This suggests that the black Friday weekend sales represented 9.33% of the total holiday season sales in 2011. Taking a cue from this, the current year's black Friday weekend sales will likely grow at 4.15%, which is $54.68 billion. This is based on the NRF's current holiday season sales estimation of $586.1 billion, representing a growth of 4.1% over 2011. However, the current behavior of consumers indicates much more growth in the cards. Therefore, let's look at the other available methods.



Survey Published

Shoppers, millions

Average Spend

Total Spend

Consumers Polled

Margin for Error






$52.5 billion








$45.0 billion








$41.2 billion








$41.0 billion



Source: NRF

The above table indicates a compound annual growth rate or CAGR of 6.4% on total spending in the four year period between 2008 and 2011. Based on the CAGR of 6.4%, revenue generation is likely to be around $55.86 billion in the coming weekend retail sales. However, given the growth rate of 9.2% and 16.67% in 2010 and 2011, this too seems to be on the lower side. Interestingly, the last two years average growth rate works out to nearly 13%. If this is taken for a potential sales outlook, it means revenue generation of $59.33 billion for the black Friday weekend. This seems quite possible.

However, further upside in revenue is quite possible given the improved employment data for October compared to the previous two years. The Bureau of Labor Statistics data indicates that jobless claims were 7.9% in October compared to 8.9% in 2011 and 9.5% in 2010. Another important aspect is the improved consumer confidence in November that touched a 5-year peak.

Additionally, the threat of higher taxes next year will force consumers to spend more this year on electronic or jewelry items, as consumers may be forced to make higher provision for taxes next year. If these positive factors add a further 2 percentage points to 13%, the black Friday weekend could post revenues of $60.38 billion.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.