Anticipation of the Black Friday deluge is officially upon us with some eager shoppers already camping out at a Best Buy (BBY) in California hoping to score good deals.
At the moment, we aren't searching for deals and discounts. Yet we'd be remiss if we didn't write about two Black Friday biggies, Wal-Mart (WMT) and Target (TGT), which will report earnings in the coming days, were featured today in a note by Janney's David Strasser.
Regarding current overall retail themes, Strasser writes:
As cross currents continue to hit the U.S. consumer, promotions continue to increase earlier in the season as companies aggressively go after fewer dollars. Consensus growth forecasts are being challenged, with a low end consumer that is continuing to struggle. Recent data points show credit companies are pulling back on low end consumers and could add another headwind to this holiday season.
Wal-Mart's defensive characteristics "remain attractive" according to Strasser. He adds:
Business remains tough, but lower gas prices should provide a rare tailwind this holiday. We are modeling third-quarter earnings-per-share of $1.13, slightly ahead of the street at $1.12, driven by a flattish U.S. comp. Traffic remains key and becomes even more important in the back half of the year, as Walmart continues to lap SNAP benefits and anticipates $500 million of incremental healthcare costs this year.
Target, according to Strasser, continues to have room for improvement, and will be one to watch. When it comes to Target's CEO, Strasser writes:
We believe there are many opportunities for improvement, as Mr. Cornell fully embraces the CEO position. We are modeling third-quarter EPS of 47 cents, a penny below consensus as U.S. traffic continues to struggle, and the Canadian segment remains unprofitable.
Wal-Mart reports Thursday and is down 0.64% in trading this afternoon. Target reports on Nov. 19 and is up 0.02%. Competitors Kohl's (KSS) and Nordstrom (JWN) also report Thursday with Kohl's down 0.83% and Nordstrom has dropped 2.40%.
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