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Consumers who think they'll be getting huge discounts on Black Friday might want to think again. In the words of the WSJ's Suzanne Kapner, "those bargains will be a carefully engineered illusion."
Retailers and suppliers first work out the lowest price they can sell a product at and still make the profit they want, and then they jack up the "suggested retail price" so that the retailer can later offer a big discount.
Another tactic is for stores to raise selling prices just before the holiday season discount period kicks in.
"The U.S. economy might be limping along, but many consumers have broken into a sprint," Jacqueline Doherty writes, in what seems like a rather paradoxical passage considering that consumer spending accounts for around two-thirds of U.S. economic output.
Doherty cites an October retail sales print that came in ahead of consensus, NRF's expectations for a healthy Y/Y increase in holiday sales, and a hefty, market-beating return for the S&P Retail Select Industry index as evidence of "improvements in the consumer's fortunes."
Still, Barron's thinks some stocks, like Michael Kors (KORS) and Restoration Hardware (RH), may have limited upside after big runs.
Among retail stocks listed as "bargains": Bed Bath & Beyond (BBBY), Home Depot (HD), and Macy's (M).
TJX Companies (TJX +1%) lowered its guidance for Q4 to $7.6B-$7.7B, from a previous view of $7.96B. The company sees Q4 comparable store sales growth of 1% to 2% and sets its Q4 EPS estimate just below Street estimates.
Earlier, the retailer beat earnings estimates with its Q3 report on brisk comparable store sales of 5%.
What to watch: TJX has been one of the most resilient retail companies in the sector, so its conservative view of the holiday season could create another ripple of worry.
Major retailers (COST, TGT, BBY, PSMT, M) are a bit edgy this year with six fewer shopping days landing between Thanksgiving and Christmas amid forecasts for slow traffic at malls and strip shopping centers.
Morgan Stanley's Kimberly Greenberger thinks the 2013 holiday season will be the most promotional one since 2008.
Economists forecast a delayed report on September retail sales will show no change in purchases as spending on automobiles stalled just a bit during the month amid federal shutdown concerns.
Though there has been a cautionary tone from analysts on retail all-stars such as Home Depot (HD), Lowe's (LOW), Gap (GPS), and Macy's (M) - retail sales ex-auto are pegged to poke out a 0.4% gain during September as some sectors have held up.
Looking ahead, a report from Deloitte suggests that retailers with solid 'buy online and pick up in store' programs could resonate with consumers this holiday season. Target (TGT), Wal-Mart (WMT), Best Buy (BBY), and Staples (SPLS) come to mind.
The National Retail Federation projects holiday shoppers will spend 2% less than what they laid out last year for gifts.
While more than half of the respondents to the NRF consumer survey blamed the economy for the planned tightening, a "crowding out" effect from the stronger automobile and housing sectors is also being attributed by some economists for the dropoff.
The number of disappointing retail reports (PetSmart, L Brands, Wet Seal, Gap) has outnumbered the upside surprises so far this month.
J.C. Penney (JCP), Wolverine World Wide (WWW) and Humana (HUM), for example, all warned this week of potential bottom-line consequences of federal furloughs and agency closures; corporate M&A plans also appear to be on hold as executives await a return to normal.
Every week the government is closed trims economic output by ~$1.6B, or 0.16 percentage point for the quarter, according to research firm IHS, and "if the shutdown drags on, the effects will start to add up."
The last fight, in 1995-96, impacted consumer confidence; with the year-end shopping season approaching, that's critical, especially for retailers.
The National Retail Federation expects sales during the November-December holiday shopping period to increase 3.9% to $602.1B, with growth accelerating from 3.5% last year. However, says the NRF, a prolonged government shutdown could hurt consumer sentiment and harm sales.
Boeing (BA) has warned that deliveries of some jets could be postponed, as the FAA officials who need to approve the planes before they're handed over to customers have been furloughed. Airbus has already delayed the delivery of an A321 to JetBlue.
The closure is hurting small businesses that rely on federal agencies to operate or that were trying to secure government-backed loans.