Inflation has weighed on consumer discretionary spending in recent quarters. Rising prices may create an opportunity for discount retailers to gain market share this holiday shopping season, according to Bank of America analyst Robert Ohmes.
The Numbers: Consumers spent a record $9.12 billion online on Black Friday this year, according to Adobe. Online Black Friday sales were up 2.3% from a year ago, with 48% of online orders taking place on smartphones.
Related Link: Retail Stocks Mixed On Black Friday Following Record Thanksgiving Day Sales: What You Need To Know
While sales were strong, budget-minded consumers are prioritizing promotions and seeking specific deals, Ohmes says.
As a result, Walmart Inc (NYSE:WMT) took an aggressive approach to Black Friday discounts that appear to have paid off.
"In the stores we visited, traffic appeared very strong, esp. in electronics, grocery & toys," Ohmes said of Walmart.
TVs, bicycles, smartwatches, and tablets seemed to be moving particularly well on Black Friday, he added.
Other Discount Retailers: In addition to Walmart, Ohmes said the value proposition of warehouse club retailers likely make companies like Costco Wholesale Corporation (NASDAQ:COST) and BJ's Wholesale Club Holdings Inc (NYSE:BJ) particularly well-positioned this holiday season. Ohmes said store checks on Black Friday showed solid traffic at both BJs and Costco, with stronger relative traffic at Costco.
Related Link: Is The Mall Making A Comeback? Abercrombie, Best Buy And American Eagle Beat Expectations
Ohmes also noted that Target Corporation (NYSE:TGT) is well-stocked for the holiday shopping season but that investors should expect elevated holiday promotions. Unfortunately, he said checks at Target stores on Black Friday revealed lighter in-store traffic than historical levels.
Benzinga's Take: Unless individual companies specifically address Black Friday or Cyber Monday sales numbers, investors won't really know how well the holiday shopping season went for retailers until fourth-quarter earnings season in January. However, as a group, inflation could make discount retailers outperformers in the coming weeks compared to higher-priced premium retailers.
Photo by Erik Mclean on Unsplash