On Monday, a KeyBanc analyst reported initial data indicating a notable shift in consumer behavior during the Black Friday sales, with online spending showing significant strength compared to in-store traffic. According to Mastercard (NYSE:MA) SpendingPulse, total retail sales, excluding automobiles, rose by 3.4% year-over-year on Black Friday, exceeding Mastercard's holiday forecast of a 3.2% increase. In-store sales saw a modest increase of 0.7%, while online sales surged by 14.6%.
The analyst highlighted that despite the overall increase in sales, physical retailer traffic experienced a decline. Sensormatic's data revealed an 8.2% year-over-year decrease in in-store shopper traffic on Black Friday. This trend is likely a result of retailers spreading their promotions across the entire weekend, which diluted the traditional surge of shoppers on the day itself. Conversely, Adobe (NASDAQ:ADBE) reported a 10.2% increase in online shopping on Black Friday, with consumers spending a record $10.8 billion, up from $9.8 billion the previous year.
KeyBanc's Hardlines team conducted store visits in New York and Florida over the Thanksgiving weekend, observing varying levels of customer traffic. Best Buy (NYSE:BBY) and Ollie's Bargain Outlet (OLLI) experienced busy traffic, while Five Below (NASDAQ:FIVE) and Walmart (NYSE:WMT) saw moderately busy conditions. The team noted that consumer electronics remains a challenged industry, yet Best Buy's strong traffic was a positive sign, particularly in tablets and computers.
According to InvestingPro data, Best Buy maintains strong profitability with a 22.4% gross margin and has shown resilience with a 28% stock return over the past year. The company's financial health score is rated as "FAIR" by InvestingPro analysts, who currently see the stock as slightly undervalued.
The analyst's store checks also provided insights into specific retailers. Five Below's customer traffic was bolstered by seasonal items, apparel, and toys, such as Hello Kitty and Funko (NASDAQ:FNKO) POP! products. Target (NYSE:TGT) experienced low traffic on Black Friday, with a brief spike in the morning due to the release of Taylor Swift-related merchandise, which quickly sold out. Williams-Sonoma (NYSE:WSM) stood out with strong traffic trends and minimal in-store promotions.
KeyBanc anticipates publishing its monthly Key First Look Data and Geolocation data later in the week to provide more detailed observations at a granular level for specific retailers. The analyst expects mixed results for retailers this holiday season, citing continued consumer headwinds and a shorter holiday shopping period. Best Buy stands out with its strong dividend profile, having maintained payments for 22 consecutive years and currently offering a 4.2% yield.
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In other recent news, Best Buy, a prominent player in the Specialty Retail industry, has seen a series of adjustments in stock outlooks following its third-quarter financial results. According to a KeyBanc analyst, the retail sector has seen mixed performance, with Best Buy experiencing a slight 1.5% decrease in indexed spend. Despite a challenging third quarter, Best Buy maintained a non-GAAP operating income rate of 3.7%.
Guggenheim maintained a Buy rating on Best Buy shares, reducing the price target to $105 from $110 based on the company's mixed performance in the third quarter. Loop Capital also adjusted its price target for Best Buy shares to $100 from $110, maintaining its Buy rating. The firm expressed optimism about Best Buy's performance at the outset of the holiday season.
Truist Securities adjusted its outlook on Best Buy, reducing the price target to $95 from the previous $107, while keeping a Hold rating on the stock. The firm noted consumer purchasing patterns showing a preference for value. Telsey Advisory Group revised Best Buy's price target to $110.00, down from the previous $115.00, while retaining the Outperform rating.
These recent developments highlight Best Buy's resilience and strategic focus in navigating a challenging market environment. Looking forward, Best Buy anticipates Q4 comparable sales to range from flat to a decline of 3% and aims to maintain a full-year non-GAAP operating income rate of 4.1% to 4.2%.
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