Casting A Negative Light On Bullish Thanksgiving Weekend Figures

Includes: BBY, HGG, M
by: Joe Woodlief

Jutting out of the mundane billboard-speckled landscape of the interstate like a hulking blue firefly in a darkroom, the local Best Buy (NYSE: BBY) store could not help but catch my eye as I drove towards the beach with my brother on Thanksgiving night. Our eyes darted down to the dashboard clock to find that it was 11:30 PM; merely a half an hour before the doors would slide open for the newly established midnight start to Black Friday. Curious, we decided to go and experience the savings rush for ourselves.

We were shocked at what awaited us as we neared the store that happened to be located in a relatively small town. A serpentine line two to three people wide in places wrapped around the entire perimeter of the store one and a half times. The scene could be described as nothing other than reminiscent of depression-era black and white soup kitchen photographs minus the heather-grey tweed overcoats. Sales representatives traipsing up and down the line of frigid bargain hunters hawked seemingly attractive financing offers while everyone anticipated midnight.

When the clock finally struck twelve, the entirely of the line surged into the store. The “lucky” first eighty or so in line quickly lapped up the advertised doorbusters. The rest of the (employee estimated) twelve hundred people quickly realized that they were essentially doing little more than helping themselves to a decently discounted midnight Best Buy experience with a checkout line that was literally around the building.

The knowledge that I will let neither myself nor anyone that I care about experience this misery is not the only piece of information that I gained that night. The observed human condition behind the supposedly bullish Thanksgiving weekend sales indicates a bearish consumer mindset. Even though small-scale personal anecdotal experience is rarely cause for significant investment action, the nature of my encounter serves to reinforce my belief that the so called bullish Black Friday sales numbers were borne out of both consumer and seller desperation rather than some sort of resurgent confidence.

The news that Black Friday spending was estimated by the National Retail Federation to have increased 9.2% to forty-five billion dollars should not be construed as a positive sign for the entirety of the holiday season. Strength of Black Friday sales should be viewed as a desperation indicator rather than a confidence indicator. As National Retain Federation Vice President Ellen Davis put it, "In a better economy, [people] might opt to sleep in" and miss out on the deals.

Both the need for discounted goods, coupled with the additional publicity given to Black Friday thanks to the controversy surrounding the early opening times is a more plausible explanation for the numbers than economic rebound. Keep in mind that the Black Friday sales in the dark economic times of 2008 also showed year-over-year positive growth in the neighborhood of 3% according to comScore.

These figure resulted in a brief market rally followed by an eventual plunge as investors realized that the numbers were artificially inflated by retailers overextending themselves with deep discounts. Keep an eye out for steep discount utilizing retailers such as Macy’s (NYSE:M) Best Buy, and HHGregg (NYSE: HGG) surging this week, as they may quickly become prime candidates for a holiday short sell.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.