By and and and  on December 1, 2009

Cyber Monday provided a bit of digital encouragement to retail shares Monday as investors digested news of an otherwise lackluster Black Friday shopping weekend.

Early indications were that Cyber Monday was shaping up to be a strong day for online sales this year. In 2008, it was one of the biggest online shopping days of the year, a blockbuster in an otherwise parched season. A National Retail Federation survey predicted that 96.5 million Americans planned to shop online Monday, up from 85 million in 2008.

Morning traffic on ShopStyle, an online fashion search engine, was high, with page views up 40 percent over last year and click-throughs to retailers up close to 50 percent over 2008, said founder and executive vice president Andy Moss. “Last year, Cyber Monday was our biggest day or close to it, and I think we’re seeing the same trend again,” he said. “More and more retailers are doing more and more offers on Cyber Monday, and it’s a compelling time to shop.”

Boots and dresses were the most popular categories searched, and over-the-knee boots, sequins, one-shoulders and leather jackets were top styles. Prada, Gucci, Burberry, Juicy, Uggs and Christian Louboutin were the most searched brands.

Monday of last week was also a big day for online fashion, as was Thanksgiving Day itself and Black Friday, said Moss. That was a change from last year, when people waited until Cyber Monday to spend online. A small but rapidly growing percentage of people could potentially be shopping in stores and online at the same time, with 1.5 percent of ShopStyle’s traffic now coming through its iPhone application.

“We are expecting mobile to explode in 2010 and we have started working with several of our retail partners to optimize the checkout experience and ease of purchase,” said Moss.

Black Friday is typically bigger than Cyber Monday for luxury retailers such as Saks Fifth Avenue, and this year was no exception. “We had a very strong Black Friday,” said Saks Direct president Denise Incandela. “It’s almost double what Cyber Monday is for us. For the high-end luxury sector, it’s not one of the biggest days of the season. That said, we are very pleased with the kickoff to our holiday and are very optimistic about a strong December.”

Saks Direct recently reported a 26 percent comparable-store sales increase in the third quarter versus the previous one. Year over year, sales rose 9 percent.

For the first time, Saks offered special promotions on Cyber Monday, such as free shipping on all orders and 20 percent off gourmet food items. Giftables such as sweaters, fashion jewelry, accessories and kids have been popular categories this season.

Other key ventures this holiday season include shipping to 93 countries and listing store promotions on Saks’ six-month-old Facebook page.

Even fashion magazines got into the online rush, with InStyle capitalizing on Cyber Monday by loading its Web site with a week’s worth of exclusive shopping deals that last until Friday. Each morning, the site will offer exclusive discounts of up to 40 percent on sites such as shopbop.com, shopkitson.com, intermixonline.com and piperlime.com. Discount codes will be valid for shopping from noon until 2 p.m. each day. Instyle.com will also tweet offers through its Twitter account. The promotion is an editorial play to drive readers to instyle.com, and the participating sites have not paid InStyle.

The cyber rush wasn’t enough to boost retail shares, however. News that more consumers shopped over the weekend, but spent less, pushed retail stocks down by as much as 1.7 percent early Monday. But the morning’s downward pressure eased and the S&P Retail Index ended Monday with a 0.5 percent, or 2.09 point, drop to 402.17 after slipping below 400 for much of the day.

Whatever may develop in the days remaining before Christmas, the Black Friday weekend appeared, at least to stockholders, to signal the season wouldn’t bring with it a dramatic turnaround, and that retailers with value-oriented businesses, and those who jump on the value bandwagon with aggressive promotions, were best situated to take advantage of the extremely discretionary nature of fourth-quarter consumer spending.



While lower prices lured shoppers over the weekend, they’re unlikely to make for an especially merry season. According to analysts, the weekend’s results aren’t likely to salvage November’s comparable-store sales results, to be reported on Thursday, either.

“Black Friday did exactly what we were thinking — it was very mediocre,” said Brean Murray, Carret & Co. retail analyst Eric Beder, who expects holiday to be “flat to slightly down” versus holiday 2008.

Furthermore, he predicted specialty retailers reporting November results this week are likely to record a year-over-year comp decline of between 3 and 9 percent for the month.

“With Black Friday only slightly better than last year, we believe any chances for material upside in the fourth quarter should be squelched for most players after November comps.”

In order to thrive this holiday, retailers will either need to offer differentiated merchandise or play the price game, he said, taking Black Friday results as another indication of shoppers’ flight to value.

According to an online survey of 1,700 shoppers by The NPD Group, 44 percent of consumers made a purchase this Black Friday because they were “worried they wouldn’t find an item again,” while 43 percent were enticed by a great sale.

“These results suggest that the fact that consumers have concerns about leaner inventories as well as concerns about not being able to find lower prices are prompting early purchases,” said Marshal Cohen, NPD’s chief industry analyst.

But Brean Murray’s Beder wasn’t as sure.

“Shoppers are going to attempt to wait it out,” he said, pointing to the most recent back-to-school selling season. “Retailers are trying to wean off consumer [value-driven] behavior, which they’ve encouraged for nearly a decade.”

Stifel Nicolaus retail analyst Richard Jaffe, however, viewed lean inventories as a tool for retailers to protect gross margin, while remaining competitive.

Predicting a “decent” holiday, Jaffe cautioned investors on a company conference call: “Our concern today is not the fourth quarter, but rather the likelihood that these improving trends will slow after Christmas as the economic realities become a greater priority for consumers, restraining their spending.” He said recent positive trends are “already baked into” retail stocks.

He also noted that “benefits of cost savings and better inventory management will be anniversaried in 2010, limiting potential upside and challenging retailers to grow earnings primarily through sales improvement.”

Sluggish earnings in the spring and a consumer still facing high unemployment and other economic challenges will “likely” cause a “pullback” in 2010.

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