FINANCE

Analysis: Strong, but not stellar Black Friday weekend as demand ‘pulled forward’

Retailers enjoyed a solid but not spectacular Black Friday shopping weekend, as online and in-store promotions proliferated earlier in the week and on Thanksgiving, cannibalizing sales that once occurred on Saturday and Sunday, the “demand pull-forward” phenomenon.

Combined with an early Thanksgiving, the demand pull-forward will also shift the traditional early December lull to a late November shopping lull. The good news is that plunging gasoline prices—down $0.35/gallon since mid-October—are giving a mid-season boost to available discretionary spending. Rising disposable income is the major driver of higher holiday sales, but the gasoline savings are giving consumers an unexpected early present under the tree, and may yet turn holiday spending from strong to stellar.

Based on CGP’s 18th annual Holiday Forecast, and updated by CGP’s 18-researcher nationwide field team’s detailed store surveys at over 100 benchmark shopping venues, the past Black Friday weekend showed solid but not record growth, with approximately $60 billion in sales (including online) for the four-day weekend, in line with its estimates. Still, several categories shined:

Consumer electronics and appliances: +6.4%, up from CGP’s forecast 6.1%

Apparel: +5.4%, in line with the forecast, and the best growth since 2011

General merchandise: +5.2%, up fractionally from the forecast.

The promotional pace was similar to last year, with 75% of major retailers offering the same Black Friday promotions as in 2017 — and the others increasing promotional intensity by only 5-10%.

The key takeaway is that shoppers and stores alike will have a happy holiday this year — assuming retailers can maintain their margin discipline. This will be the second year of 5%-plus retail growth, for the first time since 2005-2006. Looking forward, the key issue is whether this pace can be sustained into the new year and beyond. But unlike the debt-based bubble economy that led to the recession, today’s spending growth is built on a solid platform of job growth, income gains and sensible saving rates, so prospects for sustained growth into the future are improving each month.

Craig Johnson is president of retail research firm Customer Growth Partners, based in New Canaan, Conn.

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GameStop enters into $700 million deal

BY Marianne Wilson

GameStop is getting out of the mobile phone business as it moves to sharpen its focus on videogames and collectibles.

GameStop Corp. has entered into an agreement to sell its Spring Mobile business to Prime Communications L.P. for $700 million. Spring Mobile owns and operates a network of 1,289 AT&T wireless stores. The transaction is expected to close in the fourth quarter.

The move is in line GameStop’s previously announced review of its strategic and financial alternatives.

“This transaction enables GameStop to enhance our performance with an increased focus on the video game industry and the rapidly-growing collectibles space,” said Dan DeMatteo, executive chairman of GameStop’s board of directors. “These are areas where we have considerable experience and where we are well positioned to capitalize on our competitive position.”

GameStop said proceeds from the sale will be used to reduce the company’s outstanding debt, fund share repurchases, reinvest in core video game and collectibles businesses to drive growth, or some combination of these options.

In September, the retailer reported mixed results for its second quarter and confirmed it is considering a potential sale of the company among other options.

GameStop operates over 7,100 stores across 14 countries.

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Foot Locker plays hard in Q3

BY Marianne Wilson

Athletic footwear giant Foot Locker turning in a winning third quarter, with sales and earnings that topped Wall Street expectations.

Net income for the quarter ended November 3, 2018 was $130 million, or $1.14 per share, compared to net income of $102 million, or 81 cents per share in the year-ago period. Excluding items, earnings came in at 95 cents per share, topping analysts’ expectations of 92 cents per share.

Total third quarter sales decreased 0.5% to $1.86 billion this year, topping estimates. (The 53rd week shift impact reduced sales by approximately $60 million during the third quarter.) Same-store sales increased 2.9%, better than expected.

In response to sluggish sales, Foot Locker has been investing to improve its digital and in-store experience, along with collaborations with vendors. Its third quarter results suggest the efforts are beginning to pay off.

“Our accelerating comparable sales and improving bottom line reflect the strategic partnerships with our vendors, as well as our efforts to inspire and empower youth culture and create deeper connections with local communities,” said Richard Johnson, chairman and CEO, Foot Locker. “We believe we are well positioned to produce even stronger results in the all-important holiday selling season and the fourth quarter overall.”

Canaccord Genuity consumer analyst Camilo Lyon noted that in addition to Foot Locker’s improving product mix, the chain is collaborating extensively with such key vendor partners as Nike to offer a unique and differentiated experience to its customers.

“Also, the initial success of new stores in Asia and power stores (experiential, community focused) highlight incremental long term revenue drivers,” Lyon added.

As of November 3, the company operated 3,266 stores in 26 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 108 franchised Foot Locker stores were operating in the Middle East, as well as 10 franchised Runners Point stores in Germany.

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