Spinning Black Friday
By Steve Smith -- TWICE, 12/6/2004
SKUs, co-op ads, comp-store sales, sell-though and other formerly arcane terms of retailers and retailing became part of everyday American parlance starting in the 1970s, and definitely by the early 1980s. Everyone and his uncle, including housewives in Peoria, began to know what those terms, and one of the most arcane, Black Friday, mean.
How did this happen? Money, of course, more specifically Wall Street. Retailing, as an investment sector, came into its own. The emergence of mass merchants Wal-Mart and Kmart, the way they challenged the established guard of Sears, Montgomery Ward and all the major department store chains, made Wall Street wake up and take notice.
During the 1980s, “category killers,” as the investment community called them, became national players: Toys R Us, Best Buy and Circuit City, to name a few. For each of those successes there were hoards of electronics/appliance chains and toy chains that emerged, grew a little and failed. Later, warehouse clubs entered the fray, as well as home improvement chains and retailing dot.coms, the most visible being Amazon.
Retail-watching has become a pastime, and a concern, for investors, the investment community, and like it or not, one of the barometers of this country's fiscal health.
The Sears/Kmart merger right before this year's Black Friday made the investment community go into a frenzy of PR spin and alternate perceptions. At the center of both stories, not surprisingly, is the largest retailer in the world — Wal-Mart.
In the Sears/Kmart deal, many in the business media didn't see how what they consider two weak giants can compete against the 10,000-pound champion from Bentonville. Others saw it as really a real estate deal. And still others said that this just proves how powerful Wal-Mart is and will be in the future.
So, we move to Black Friday. Yours truly and senior editor Alan Wolf unscientifically visited a few stores the day after Thanksgiving in the New York metro area. From what we saw, business was great. Initial reports in the business press, newspapers, Web sites and cable networks all reported high single-digit, and in some cases double-digit sales gains vs. last year's Black Friday.
Then the chain from Bentonville weighed in. Same-store sales for Wal-Mart predicted that their November sales would be 0.7 percent higher, down from the predicted 2 percent to 4 percent gain in the month. What was to blame? Wal-Mart didn't cut prices as aggressively as usual. They chose to try and generate higher profits, for a change. (Yes, re-read that sentence.)
Two weeks earlier Wal-Mart was being lauded. After Thanksgiving there were complaints that they don't have the selection, specifically in electronics. A headline on CNNMoney put it like this: “Wall-Mart: A big-box bore?”
Wal-Mart certainly doesn't need to be defended by anyone, least of all me. So, the world's top retailer had an off month and Black Friday. As anyone who is reading this knows, Black Friday does not guarantee a good or bad Holiday Season. But it could, momentarily, hurt specific stocks and investors.
What all this investment industry, investor and consumer media spin of recent weeks really means is that while many people know the formerly arcane terms of retailing, few still actually understand how this business works. Remember that when you compare your company's performance during the next few weeks against others.
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