In the United States, Black Friday tends to be a holiday onto itself. Black Friday is the name given to the Friday after Thanksgiving and marks the kick off to the holiday shopping season. This shopping day is often the largest, most profitable shopping day of the year for many retailers.
In the US, consumers often camp-out in front of stores for hours, and sometimes days in order to take advantage of the deals offered on this day. There has also been an increasingly popular trend in retail businesses to open earlier and earlier, and many stores are opening there doors on Thanksgiving night in order to attract more shoppers.
For investors who are looking to capitalize on the retail sector, one must look to companies that are in a position to profit from Black Friday, and continue that momentum into the future, regardless of the weakness that is expected in holiday sales overall. Investors should be looking for business that have performed well over the last year and can maintain that performance into 2012.
Two stocks to watch in the retail sector for a play on Black Friday sales are Dick’s Sporting Goods (DKS) and Amazon.com (AMZN). These two companies offer investors a one-two punch of good business execution, as well as continued opportunities for long-term growth.
Black Friday Sales Cherry On Top Of Strong Year For Dick’s Sporting Goods
Sporting goods retailer Dick’s Sporting Goods offers a broad range of brand name sporting goods equipment, footwear and apparel in a specialty store environment. Dick’s Sporting Goods operates over 400 Dick’s stores in 42 states, as well as 81 Golf Galaxy stores in 30 states. Dick’s Sporting Goods also operates the e-commerce sites for both Golf Galaxy and Dick’s.
Third quarter results for Dick’s Sporting Goods exceeded expectations, with consolidated same-store sales increasing 4.1%. This increase in consolidated same store sales consists of a 3.8% increase at Dick’s Sporting Goods stores, an increase of 2.4% at Golf Galaxy stores, and an increase of 16.8% in e-commerce business.
In light of a solid third quarter performance, Dick’s Sporting Goods raised guidance for the fourth quarter as well as their full year guidance, citing meaningful sales increases, strengthening profit margins, and a healthy balance sheet. Dick’s finished the third quarter of 2011 with $483 million in cash and cash equivalents, and carried no outstanding borrowings under its $440 million credit facility.
Dick’s announced on the 14th of November an annual dividend of $0.50 per share (1.26%), and reflects the company’s confidence in its financial strength and potential for growth. Dick’s is currently trading at $39.85, and has an average analysts’ price target of $46.63.
Strong Black Friday sales will further add to Dick’s bottom line, further positioning the company for continued growth and upside potential for share prices.
Cyber Monday Shaping Up To Be More Popular Than Black Friday
Amazon.com, a user centered company focusing on consumers, sellers and enterprises, operates both in North America as well as internationally, and serves consumers through its retail websites. The company’s focus is on selection, price and convenience, and its websites are designed to enable products to be sold by both Amazon itself as well as third party sellers, spanning dozens of product categories.
Amazon missed on earnings for the third quarter of 2011, and the company has cautioned that it is not expecting the company’s Kindle Fire to realize profits in the near future. The Kindle Fire is, however, priced attractively, and will provide a way for the company to direct consumers to other products on its website.
An uptick in online shopping is expected for this year, with consumers planning on spending 41% of their holiday budget online, up from 33% in 2010. As the majority of major retailers are currently offering options for free shipping as well as the popular ship-to-store option, holiday shopping is expected to become a key point of sale for online retailers.
With nearly two out of every five shoppers planning on getting up early on Black Friday to brave the lines, approximately 50% of consumers plan on taking advantage of deals offered on Cyber Monday, positioning this online shopping day to be more popular than Black Friday.
The near term may prove to be a challenge for Amazon’s share prices, as technical indicators suggest that the stock is topping out. Amazon has recently broken trend and that almost inevitably leads to worsening conditions for a stock. For investors willing to take a long-term view, this break in trend could prove buying opportunities for Amazon stock.
The broad growth of Amazon is attractive for long-term investors, and Amazon has an estimated three to five year EPS growth rate of 24.4%. Currently trading at $185.50, the stock has an average price target of $240.32, which would reward patient investors with a nice upside for this online retailer.