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The top story for the week is the Black Friday madness, a financial pivot for virtually all consumer retailers, and one that has quickly become engrained in mainstream pop-culture. As the crowds continue to grow larger and in many cases, become alarmingly aggressive, the shopping spree after the Thanksgiving holiday represents all that is uniquely and unashamedly American. We are bold, we are brash, and we simply don’t give a damn!
As it turns out, bargain hunters and urban adventurists alike are in good company. According to the recently released Black Friday Factor Survey, a report produced by global brokerage firm Convergex, more than two-thirds of financial industry respondents expect this year’s Black Friday sales to grow at least two-percent against the prior year’s result. Perhaps more surprising is the fact that 37-percent of the respondents expect growth of at least four-percent or more. Overall, a strong majority of financial experts are predicting total fourth quarter sales to improve significantly.
This would be welcome news to major brick-and-mortar establishments such as Best Buy, which was recently featured as a technical analysis spotlight at CrushTheStreet.com. For the consumer electronics giant, Wall Street has rewarded management’s efforts to turn around its slothful business model, specifically addressing the showrooming dilemma, in which shoppers use physical stores to check out the latest gadgets before making the actual purchase in an online shop.
However, the widely anticipated bullishness towards this year’s shopping season may not be enough of a substantial support line for struggling retailers. Best Buy’s financial statements show a marked decline in top-line sales on an annual basis, and even from a quarter-to-quarter perspective, gross profit margins are flat-to-declining. If holiday sales are not up to par, fair-weather investors on the Street can quickly play the role of the harlot, sending equity valuations plummeting.
Unfortunately, there’s not much that retailing companies can do to differentiate itself from their competitors other than to lower the price, a move that would eat into profitability margins and a tactic that can only be performed using leverage for the most financially challenged organizations. Just take a look at RadioShack. Their come-back advertising campaign kicked off in the most conspicuous of manners, hiring several 1980’s icons for tongue-in-cheek cameo roles that was brilliantly broadcast over the other uniquely American holiday: the Superbowl.
At the time of the commercial, RadioShack shares sold for more than two dollars. Today, those same shares could be had for 85-cents, a dramatic erosion of capital that poured salt into the wounds of a dwindling investor base. Although the company’s problems were evident well before their ill-fated come-back attempt, it does demonstrate the danger of over-reliance on any singular event, even one that is backed by the wallet of the good old U.S. of A.
Moving onto financial news, the markets were quiet as expected going into a holiday shortened week, with the Dow Jones closing at 17,827, and the S&P 500 finishing Wednesday’s session at 2,072. The precious metals complex was somewhat mixed, with gold’s valuation little changed from the prior week, while silver dropped more than one-percent ahead of the Thanksgiving holiday. Palladium regained the 800 dollar level as deterioration between Russia and the West underlined potential supply concerns. Finally, bitcoin investors are witnessing encouraging technical signs as its price action has been steadily increasing on an overall basis, with the digital currency trading hands at 370 dollars at last count.