Bridget Weishaar: Holiday sales are an incredibly important time for retailers, accounting for about 20% of total sales. The period between Black Friday and Cyber Monday is key. In an NRF survey, it was estimated that 69% of Americans plan to shop during the Thanksgiving weekend.
But behaviors are definitely shifting, and we see a couple trends. First, spend is shifting away from brick and mortar and to online. According to NRF data more Americans shopped online than visited stores Thanksgiving weekend last year. Second, deals are starting earlier. Wal-Mart and Amazon have already started offering holiday discounts. NRF data shows that more than 40% of Americans already started their holiday shopping by Nov. 1. Third, on the upside, inventory levels look much better controlled across apparel retailers this year, and weather thus far has been cold. Low inventory allows companies to chase what trends are working and control promotional levels better.
In terms of stocks, we think two stocks are well positioned to capitalize on trends: TJX and L Brands. TJX plays into consumer demand for value, and given price points and the treasure hunt experience, we think it is more defensible to online threats. Trading at an 18% discount to our $87 fair value estimate, we think it offers an attractive risk/reward proposition. L Brands is trading at over a 25% discount to our $69 fair value estimate, and we think this company is again defensible to online competitors given the difficulty of selling scented products online and the need to be sized for many of the intimate category products. We think this company is at an interesting inflection point with an improved product pipeline and the comping of swim and apparel exits.