What Shoppers Want During a Short Gift-Giving Season

Zain Akbari: As the holiday shopping season gets underway, we believe retailers will have to navigate a highly competitive environment, with American consumers generally in decent, though not spectacular, shape amid considerable uncertainty spurred by trade, politics, and demographic-specific factors.

As seen by retailers’ generally mixed third-quarter results, the competitive environment leaves little room for execution missteps, with price competition intense and customer expectations high. Digitization remains a key theme, and we believe customers will reward retailers that can provide convenience through environments that are efficient and convenient, including click-and-collect and ship-to-home.

With a shorter period between Thanksgiving and Christmas, we believe already time-starved customers will especially value the opportunity to check items off their shopping list with the least possible time commitment.

As prices should remain in sharp focus and convenience should be at a premium, we see wide-moat Amazon as poised for success both in the holiday season and into 2020, believing it should be able to meet those key needs for a growing roster of Prime members, particularly after its most recent moves to next-day delivery. Augmented by an expanding digital content library, unparalleled logistics capabilities, and strong nonretail operations, we see the shares as attractive, trading at a roughly 25% discount to our $2,300 per share valuation.

Among more-traditional brick-and-mortar retailers, narrow-moat rated Nordstrom should be able to capitalize on its namesake luxury and off-price stores and a loyal customer base built on Nordstrom’s reputation for differentiated product and service. We see some opportunities in what we believe is a top operator in the competitive U.S. apparel market, with Nordstrom trading at about a 30% discount to our $55 per share valuation despite a postearnings rally.