Black Friday Stocks To Watch: Department Stores, Apparel/Footwear Retail

Page 1 of 2

As Black Friday draws near more stores are announcing that they will start sales early by opening on Thanksgiving itself. American personal expenditure on non-durable goods is slowly going up (see graph below). Despite a slump at the beginning of the year, dollars spent in the early summer showed a positive change of .28%. But American real disposable income per capita is lower than last year. In fact, department stores like Macy’s, Inc. (NYSE:M) reported disappointing sales in the last quarter partly due to consumer health. Sluggish sales this year are going to be compounded by the shortest shopping and holiday season possible, a full 6 days shorter than usual because of a late Thanksgiving. Since the holiday shopping season can generate as much as 40% of annual revenues for some retailers, its little wonder then that Retail Trade is banking on Thanksgiving as well as Black Friday to make up for lost revenues.

Macy's, Inc. (NYSE:M)Free snapshot reports on all 3 Black Friday stocks. Get our star ratings and scores for all fundamentals and dividend quality!

Download

There is however some good news for Black Friday stocks i.e. stocks of companies that could see a surge in revenue during the holiday season. American Express released a consumer survey that showed that consumers intend to start their holiday shopping sooner and spend $400 more than last year. To capitalize on this almost 800 Macy’s stores will open at 8pm on Thanksgiving. Kohl’s Corporation (NYSE:KSS) and J.C. Penney Company, Inc. (NYSE:JCP) have also announced they will open on Turkey Day. Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) have already been open previously on the last Thursday in November. Opening a few hours earlier than usual might give a much needed boost to many businesses. Brick and mortar stores will however still need to compete with e-commerce; up until August, retail had only grown around 3% whereas e-commerce sales were up over 8%. A Deloitte survey reveals that 47% of consumers intend to shop online this year for the holidays. Possibly because Black Friday lines and frenzies are well known; consumers have previously smashed doors at Urban Outfitters, Inc. (NASDAQ:URBN) and there have been stampedes in stores.

3 Black Friday Stocks: Retail & Department Stores

We examine 3 Black Friday stocks from a fundamental perspective. What does each of these companies have  going in its favor as consumer spending continues to increase? All three companies have both brick and mortar stores as well as online channels for shoppers. Analysis Notes: (i) CapitalCube’s analysis is peer-based and in the analysis below each company has been analyzed relative to its peer set (ii) The words median and average are used inter-changeably and refer to the peer median (iii) Readers can access our analysis on over 40,000 companies by registering with us.

Macy’s Inc (NYSE:M)

Macy’s operates under two brands: Macy’s and Bloomingdales. It’s flagship store in Herald Square, New York is one of the largest stores in the world at 2.2 million square feet. The company began a $400 million renovation project of the store due for completion this November. Macy’s is on our list of Black Friday stocks  because our fundamental analysis shows that compared to its peers, the company has better control over its costs. In a highly competitive retail season this could be advantageous. Even though changes in Macy’s revenues are in-line with its peers (annual revenue changed by 4.9%) its earnings performance has actually been better — its annual earnings changed by 6.3% (compared to the average of 2.4%). The department store chain currently manages to convert every 1% of change in revenue into 1.3% of change in annual reported earnings. Our analysis also shows that the company’s recent returns have improved versus the last five years (see the graph below). Macy’s current return on assets is 6.6% (the same as its peers). This recent performance contrasts with its less than peer median return on assets over the past five years (-0.3% versus the average of 3.9%). The company’s relative operating performance seems to be improving.

Urban Outfitters, Inc. (NASDAQ:URBN)

Urban Outfitters, Inc. is a lifestyle retail company, which operates retail clothing stores as well as a wholesale division. The Retail segment consists of Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir and BHLDN brands, whose merchandise is sold directly through stores, web sites and other channels. The Wholesale segment consists of Free People division. Urban Outfitters attempts to achieve high profit margins (currently 9.0% vs. 6.5% on average ) through differentiated products. It currently operates with peer average asset turns of 1.5x. The company also supports growth; in the past three years its annualized rate of change in capital (1.5%)  is higher than average (-1.0%) and this investment has generated an above average return on capital for Urban Outfitters (18.2% in the same period). This is evidence that the relatively high capital investment has been successful given the relatively strong growth in its returns. Finally, it also seems as if the market sees faster growth ahead for the company (see graph below). While the company’s revenues growth has been around average in recent years (13.0% vs. 12.1% peer average for the past three years), the market gives its shares a higher than peer median PE ratio of 21.2. For all these reasons Urban Outfitters is on our Black Friday stocks list.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 9 Most Dangerous Countries for Tourists to Visit

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!