The annual Black Friday marks the official start of the U.S. holiday shopping season. Despite the National Retail Federation (NRF) predicting a record 186.9 million shoppers from Thanksgiving through Cyber Monday, market complexities—particularly persistent inflation and tightening consumer budgets—suggest sales growth will slow to 3.7%-4.2%, with average spending per person expected at $890.49. This "high foot traffic, low budget" phenomenon poses challenges for retailers relying on the holiday season for a third of their annual profits. With unemployment nearing a four-year high, consumers are becoming more selective, leading to a clear divergence in spending behavior.
**Discount Retailers Lead the Pack** Amid widespread financial pressure and a focus on value, retailers offering the steepest discounts are favored. Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, observed that Walmart (WMT.US) shoppers appeared "stressed" ahead of Thanksgiving, but the retailer successfully catered to budget-conscious households by adjusting pricing strategies, such as offering varying sizes of potatoes and turkeys. Forrest noted Walmart’s in-store "eye-catching displays," like fully set Thanksgiving tables, outperformed competitors like Target, highlighting its ability to attract shoppers during tough times.
Off-price chains are seen as direct beneficiaries. Forrest expects TJX (TJX.US) to outperform traditional department stores, stating, "If you’re careful with your money, you want the most bang for your buck." This view is echoed by Morningstar senior retail analyst David Swartz, who noted investors have favored Ross Stores (ROST.US) and TJX in recent years for delivering a "heavy competitive blow" to legacy players like Macy’s (M.US) and Kohl’s (KSS.US). While Kohl’s stock surged on narrower sales decline forecasts, its multi-quarter streak of falling same-store sales underscores its struggle against discount and online giants.
**Luxury Market Holds Resilience** Despite pressure on middle- and lower-income households, affluent consumers buoyed by stock market gains are expected to fill some spending gaps. Moody’s Analytics data shows the top 10% of earners (annual income ≥$250,000) accounted for 48% of total consumption in Q2 2025, up from 35% in the mid-1990s. Swartz predicts strong holiday performances for premium brands like Ralph Lauren (RL.US), Ulta Beauty (ULTA.US), and Tapestry (TPR.US), despite their elevated valuations. Fundstrat economist Hardika Singh emphasized monitoring high-income shoppers’ spending, warning, "If their outlays waver, our economy could face trouble."
**Undervalued Dark Horses** Beyond obvious winners, some undervalued retail stocks present cyclical opportunities. Swartz highlighted Nike (NKE.US) and Lululemon (LULU.US), which have underperformed recently but could rebound sharply if conditions improve. Forrest also sees turnaround potential in VF Corp (VFC.US) (owner of The North Face and Vans), down ~19% YTD, and praises Anthropologie’s outperformance within Urban Outfitters’ portfolio.
**Conclusion: A Tale of Two Retail Worlds** For investors seeking Black Friday gains, the market narrative is clear: discount retailers and premium brands with precise pricing strategies will thrive. Traditional department stores face headwinds, while winners will be those capturing cautious shoppers (e.g., Walmart, TJX) or high-net-worth clients (e.g., select luxury names). This holiday season will starkly reflect retail’s growing polarization.
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