By Ike Boruchow, analyst, Sterne Agee, New York
This year, Black Friday gave us a taste of what to expect for the remainder of the holiday selling season: intense competition, deep discounts, and choppy mall traffic. Earlier store openings drove heavy traffic, which dissipated and then bounced through the day.
We note that 70% of retailers were more promotional this Black Friday with the biggest changes witnessed at Gap, Old Navy, Urban, and Vera (Vera Bradley), while only a handful of concepts were similar/less promotional (Anthropologie, Bath & Body Works, Ulta).
Shoppers Came Early, Went to Sleep, Returned With a Vengeance. With many stores opening on Thanksgiving evening this year, shoppers were able to begin their Black Friday shopping during "normal" hours, which caused an early flood of consumers to the mall.
Feedback from most stores we visited was that traffic was extremely strong beginning late Thursday night until 3 AM, at which point things slowed considerably. We observed a noticeable pick-up in traffic in the late morning hours (around 10 a.m.), and by noon the mall was packed again. According to the National Retail Federation, the Thanksgiving pull-forward caused Friday traffic to be down over 11%, but combined Thursday-Friday traffic was up 1.2%.
Holiday 2013 Off to a Very Promotional Start. We compared Black Friday promotions for 31 different retail chains, and we found that 21 (almost 70%) were more promotional year over year while only four brands (less than 15%) were less promotional.
Of note, the Gap and Old Navy brands were significantly more promotional, going 50% off the entire store (last year, Gap was 20%-60%, Old Navy's discounts were product-specific and generally less than 50%). Also, the Urban Outfitters brand originally planned to repeat last year’s "extra 50% off sale until 10 a.m." promotion, but the promo was surprisingly extended to noon and then was extended for three more days (through Cyber Monday).
Black Friday Traffic Winners: LTD (L Brands), VRA (Vera Bradley), KORS (Michael Kors), Gap Brand, AEO (American Eagle Outfitters), Loft. We were most impressed by our checks at the BBW (Bath & Body Works) brand, which was extremely crowded with long lines at the registers, even during the early morning lull. Victoria's Secret also enjoyed strong traffic trends, with a strong reception to the revamped beauty assortment. At VRA, we saw many customers packed into the small box, with traffic being driven by 50% off most of the store and a free tote with $100 purchase.
The Gap brand drove strong foot traffic with its 50% off everything promotion, and KORS also appeared to be a big traffic winner on Friday. Outside our coverage, we observed very strong traffic and conversion at AEO, which increased its Black Friday promo to 50% off the entire store (versus 40% off last year), while shoppers also responded strongly to Loft's 50% off promo (same as last year).
Black Friday Traffic Losers: COH (Coach), Lucky Brand, FOSL (Fossil Group). Traffic trends were moderate at COH full-price locations, with the company repeating LY's 25% off coupon for "Liking" it on Facebook.
We also believe traffic was soft at Lucky Brand. Its 30% off promotion was flat year over year but likely could not compete with the 40%-50% off at many competitors.
Outside our coverage, FOSL appeared to have a difficult Black Friday, with minimal customer traffic and a B2G1 bracelet promo that was not very compelling.