Analysis: Black Friday weekend winners include Victoria's Secret, Bath & Body Works, Old Navy

New York -Ike Boruchow, analyst, Sterne Agee, reviews Black Friday results in the specialty retail sector:



Black Friday gave us a taste of what to expect for the remainder of the holiday selling season: intense competition, deep discounts and volatile mall traffic. Overall BF weekend traffic was "so-so," with another year of big gains on Thanksgiving (up 20%) and big declines on Friday (down 8%). We came away concerned on the level of promotion witnessed during the weekend (approximately 60% of concepts monitored were more promotional year-over-year—noting a higher level of markdowns and weaker traffic at Michael Kors, Urban Outfitters (brand) and Gap (brand). On the positive side, we believe Victoria's Secret, Bath & Body Works, Old Navy and Anthropologie were BF winners.



• Black Friday Weekend Has Ups and Downs, Likely Disappoints Retailers. With more and more retailers opening their doors on Thanksgiving (and increasingly earlier in the evening), the BF weekend started off strong, with store traffic (as measured by ShopperTrak for the apparel/accessories category) up 19.8% on Thursday.



However, this spike was merely a pull forward of Black Friday and weekend demand (similar to last year), as store traffic fell 8.3% on Black Friday. All in, the Thursday through Saturday of BF weekend saw a 3.3% decrease in store traffic, while the full week was down 3.6% (worse than the down approximate 1% trend to start the month).

In addition to the slower traffic trends, other negative data points have started to trickle in, with the National Retail Federation (NRF) estimating that overall spending was down a whopping 11% (based on a survey of nearly 5,000 consumers).



• Promotional Activity During Black Friday Weekend Significantly Elevated. We tracked Thanksgiving weekend promotions at nearly 40 retailers. Over 55% of these chains were more promotional year over year (vs. only 18% that were less promotional).



This level of promotional activity is noteworthy for two reasons. First, promotional activity took a meaningful step up on Thanksgiving weekend last year (65-70% of concepts), so the fact that promotional activity was significantly higher once again this year is quite concerning given the comparisons.



Secondly, the percentage of concepts that were more promotional year over year (56%) represents a significant sequential acceleration from the past 3-4 months (when ~45% of concepts were more promotional year over year.



• Positive Read-Throughs (The Pilgrims): Victoria's Secret, Bed, Bath & Body Works, Old Navy, Anthropologie. We observed generally solid traffic trends at both of Limited Brands' core concepts. While Victoria's Secert ran the same primary promotion year over year, Bath & Body Works switched up their promotional structure this year, offering "Buy 3, Get 3 Free" on everything in the store (a more straight-forward message than last year, when they had different offers for each category in the store).



Old Navy repeated last year's "50% off everything" promo, though they pushed the start time up three hours (to 4 pm Thursday). We observed very strong traffic trends and long lines at checkout at Old Navy which likely drove strong results. We also observed strong activity at Anthropologie, though the concept did offer a larger store-wide discount year over year (25% off the store vs. 20% off last year).



• Negative Read-Throughs (The Turkeys): Coach, Kors, Gap, Urban Outfitters. This year, Coach chose not to participate in the Black Friday promotional whirlwind (no markdowns or deals), and they may rue that decision, as traffic trends appeared extremely slow overall. At Kors, we saw discounts on core handbag styles (including a large amount of Collection merchandise) ranging from "25% off" all the way to "50% off" (vs. 25% off last year), as well as 25-30% off a small selection of ready-to-wear, watches and jewelry. Though some stores appear to have performed well, others were uncharacteristically quiet.



Gap's "50% off" promo (same as last year) appeared to have failed to entice shoppers, as we observed very light traffic/conversion, as well as cluttered/over-inventoried stores. Urban Outfitters repeated last year's "extra 50% off sale items" promo, and we observed relatively slow traffic trends, light conversion and elevated clearance inventory (spilling over into the full-price floorspace). Urban Outfitters also chose to pull their Cyber Monday deal into Sunday.



• Larger Accessories Markdowns at Department Stores. While specialty stores were certainly promotional this past weekend, we also observed greater markdown activity for Coach, Kors and Fossil product at department stores. At Macy's, we observed discounts on Coch and Kors handbags of up to 40% (vs. 25% and 20%, respectively, last year), while select Michael Kors and Fossil brand watches were 50% off (plus an extra 10% off for Fossil brand).



Nordstrom was offering an extra 20% off select handbags and watches (across virtually all brands) - whereas last year they did not have any handbag/watch promotions on Black Friday at all.