Holiday Shopping Season Is Underway



Black Friday, or the day after Thanksgiving, marks the official start of the holiday shopping season. This year, the holiday season is atypically brief; in fact, it’s six days shorter than last year. In addition, Chanukah started much earlier than normal, which will also have impact on holiday season sales, as the majority of Chanukah-related shopping likely took place before Black Friday.

The track record of one of the premier forecasts of expected retail activity is published by the National Retail Federation, which commissions an annual Holiday Consumer Intentions Survey (http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=1674). The NRF survey’s track record is, to say the least, poor. The worst example of its shortcomings was seen in 2009 when the survey forecast a sharp 43% year-over-year sales decline. In the end, sales rose roughly 3%.

This year’s outlook is that retail sales will be up 3.9% from last year. Early indications are less rosy, as retail spending over the Thanksgiving weekend dropped for the first time in at least seven years, the industry’s main trade group said. The inherent difficulty in forecasting retail activity as well as the seasonal fluctuations in activity can add to short-term market volatility. We prefer to focus on the long-term trends of consumer behavior and the industry itself.

In addition to the above, the retail world is evolving as an increasing number of transactions are taking place online. In short, the retail industry poses many challenges as success depends on being able to gauge and even stay ahead of the ever-changing tastes and preferences of consumers. All of the above factors create uncertainty and, at times, opportunity. At BWFA, we focus on long-term trends and finding companies with strong management teams that are good capital allocators. This preference extends to the retail sector as well.