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Black Friday merchants look to extend moment of retail optimism


    People lined up to check out during a Black Friday sale at a Best Buy store on Thanksgiving Day in Overland Park, Kan.

As Black Friday shoppers descend on stores this weekend, retailers are experiencing something that’s been in short supply: optimism.

Brick-and-mortar chains are coming off a generally positive earnings season, with companies such as Wal-Mart Stores Inc. seeing their shares reach record highs. Even the beleaguered department-store industry is finding reasons for hope. Macy’s Inc. and its peers rallied earlier this month after giving an upbeat outlook.

Retailers are now taking that spirit into Black Friday weekend, which traditionally kicks off the holiday shopping season. While the event has lost some of its buzz in recent years — there will probably be smaller crowds and fewer shoppers fistfighting for big-screen TVs — stores aim to build on the momentum. Companies like Target Corp. have revamped their selection and staffed up in anticipation of a merrier Christmas.

“We’re in a much stronger position entering this season,” Target Chief Executive Officer Brian Cornell said in an interview.

The National Retail Federation projects that about 164 million consumers — 69 percent of Americans — will shop at stores or online over the long weekend that starts on Thanksgiving. Though Black Friday still has strong symbolism within the industry, consumers have become less loyal to the event’s promotions. Instead, they’re spending more of their holiday budgets before or after Thanksgiving.

Sales growth

Overall holiday spending is expected to climb as much as 4 percent from last year, helped by low unemployment and rising home values. The purchases will amount to roughly $680 billion in November and December, the Washington-based NRF estimates.

Retailers have been offering deals online and in stores all week, aiming to get a jump on Black Friday and cut through the noise. The early indications are positive, said Jerry Storch, head of Storch Advisors and the former CEO of Hudson’s Bay Co.

“The question will be, who’s going to win and who’s going to lose?” he said.

Plenty of major retailers continue to languish, and it’s hard to tell if the holidays will bring them much relief. Comparable sales — a key measure — plunged 17 percent last quarter at Sears and 12 percent at J. Crew stores.

Read more: retailers facing make-or-break holiday seasons Inc., of course, is poised to be one of the winners. The e-commerce giant recently overtook Wal-Mart as the top toy destination, helped by low prices, according to Jefferies LLC analyst Stephanie Wissink.

Online king

Amazon will account for about 44 percent of U.S. retail e-commerce sales this year, making it the undisputed leader online, according to EMarketer Inc.

But internet sales represent less than 12 percent of total holiday retail purchases, the research firm estimates. That means there’s still plenty of opportunities for brick-and-mortar chains to thrive.

Stores also are getting smarter about how they do sales and discounts, said Charlie O’Shea, an analyst at Moody’s Investors Service.

“The retailers are getting more tactical with promotions — with online marketing and a whole lot of other stuff happening,” he said. “You’re going to see more creative promotions.”

About 77 percent of retailers that already reported third-quarter earnings met or exceeded analysts’ projections, according to data compiled by research firm Retail Metrics. Analysts have boosted their year-end earnings estimates for the S&P 500 retail index over the past month by more than any year since 2009, according to data compiled by Bloomberg.

That’s given investors more confidence that the sector is finally seeing a comeback. The S&P 500 retail index has risen 22 percent so far this year, compared with a 16 percent gain for the overall index.

Disaster recovery

Even so, recent hurricanes and other natural disasters still loom over the industry. Consumers in hard-hit areas may be more focused on getting back on their feet, A.T. Kearney partner Ryan Fisher said in a report.

“This holiday period won’t be great for retailers serving the charred remains of neighborhoods in Santa Rosa, California, or the storm-ravaged communities across the Gulf of Mexico and the Caribbean, where consumers are going to be spending their money — assuming they have any to spend — rebuilding rather than accessorizing,” he said.

To maintain momentum, retailers will be trying to capitalize on shoppers combining in-store and e-commerce purchases. Though almost 90 percent of consumers are planning to visit physical stores, many plan to complete their shopping lists online, a survey by PricewaterhouseCoopers LLP found. That means chains have to make sure in-store shoppers are using their websites as well.

It will take time to see how it all plays out, Storch said.

“Black Friday I expect to be strong,” he said. “And then we’ll see what happens.”

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