Report: Winter Retail Off to Strong Start Despite Sluggish Black Friday

The 2020 winter retail season is projected to be positive despite some concerns that the traditional Black Friday retail jump-starter underperformed. New credit card data from Bank of America Merrill Lynch for a seven-day period through Nov. 21 (before Black Friday), saw a 9.1% uptick in purchases compared to the same period in 2019. Online sales through the winter holiday season are projected to increase by 31% from last year.

Bank of America contends retailers, especially big-box stores such as Walmart, Target and Best Buy, have spread out Black Friday deals and consumer incentives throughout the holiday period.

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Adobe Analytics predicts that U.S. online holiday sales will total $189 billion, shattering all previous records with a 33% increase from 2019 — equal to two years’ growth in one season. If consumers receive another round of stimulus checks and physical stores need to shut down again in large parts of the country, consumers are expected to spend an additional $11 billion online, surpassing a total of $200 billion (47% increase from 2019).

Instead of Cyber Week (Thanksgiving Day to Cyber Monday), Adobe expects November and December to turn into Cyber Months this year:

  • Online sales will surpass $2 billion every day between Nov. 1-21 and increase to $3 billion a day Nov. 22–Dec 3.
  • Black Friday is projected to generate $10 billion in online sales, a 39% increase from 2019; Cyber Monday will remain the biggest online shopping day of the year with $12.7 billion, a 35% jump YoY.
  • Americans will spend $28.1 billion more on their smartphones vs. 2019, accounting for 42% of all online sales, a 55% increase from 2019.
  • Small retailers ($10 million-$50 million annual online revenue) will see a larger boost to revenue (107% boost) vs. large retailers (84% boost).
  • Most anticipated gifts/toys: PlayStation 5, Xbox Series X, Nintendo Switch. Adobe expects 9% of all holiday customers to be net new online shoppers due to the pandemic, and conversion rates are expected to increase significantly (13%).

 

“Despite the lower-than-expected growth on Black Friday, we expect total holiday season sales could still exceed the consensus 31% growth as Black Friday is expected to generate only about 5% of total holiday season expected sales ($10 billion of $190 billion per Adobe Analytics), and retailers are offering prolonged sales, lasting the entire holiday season,” Bank of America wrote in a note. “The more spread out sales should also help alleviate fulfillment bottlenecks, spreading out capacity utilization over a longer period of time.”

Wall Street Firm: Apple TV+ Will Have Little Impact on Netflix

Apple is set to launch its $4.99 branded Apple TV+ streaming video service on Nov. 1 — less than half the price of Netflix. The media giant is also spending $6 billion on original content.

Wall Street’s Bank of America Merrill Lynch says Netflix has nothing to worry about. The investment bank says Netflix has significant advantages over Apple TV+ when moving past the media hype.

“We don’t see Apple TV+ in its current form as likely to disrupt Netflix’s positioning as the subscription video-on-demand staple for consumers,” analyst Nat Schindler wrote in a note.

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Specifically, the investment firm contends Apple TV+’s nine original titles streaming at launch are dwarfed by more than 400 original series available on Netflix.

The SVOD pioneer also has nearly 4,000 movies and 1,800+ episodic series available.

“We see Apple TV+ as likely to be hit-driven in the near term, with subscribers turning it on and off based on whether a series gains mainstream appeal,” Schindler wrote. “Apple’s content library gains scale to compare to Netflix or Amazon, it is likely as a nice-to-have for Apple device users/buyers and no substitute for Netflix’s large catalog of licensed content and originals.”

Netflix Stock Up as App Downloads Surge

Shares of Netflix are up 3% Sept. 9 in midday trading following a Wall Street report outlining a surge in downloads of the SVOD behemoth’s app.

Apps are indicative of video streaming outside the traditional in-home television on portable devices such as cell phones, tablets and laptops.

Data from Bank of America Merrill Lynch found that app downloads in the current third quarter (ending Sept. 30) are up 18% from the previous-year period and 30% from Q2 (ended June 30).

Domestic app growth is up 6% year-over-year and 13% from Q2, while Netflix’s global app downloads are up 21% from last year and 34% from Q2.

Bank of America Merrill Lynch attributed the third season bow of original series “Stranger Things” in June for the stock bump.

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New GameStop CEO Promises Change; Wall Street isn’t Buying: Stock Down 38%

New GameStop CEO George Sherman, in his first earnings call on June 4, pledged to shake up the status quo in an effort to transform the world’s largest video game retailer in the digital age.

Wall Street beat him to the punch after GameStop reported a 75% drop in quarterly income — driven in part by a 35% drop in console sales. Revenue fell 13.3% to $1.54 billion.

Company shares are down a record 38% in midday June 5 trading, with more than six times the typical daily volume of shares traded in just four hours.

GameStop CEO George Sherman

“We struggle with how much GME will able to monetize new ‘experiential’ and subscription initiatives such as eSports and revamping the PowerUp rewards program,” Bank of America Merrill Lynch wrote in a June 5 note.

Sherman said the “GameStop reboot” must “transform” the retailer to remain a viable player in a changing industry underscored by subscription streaming and digital access.

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He said the retailer would focus on the “20% of our SKUs that drive 80% of our business.” Notable among those performing SKUs: Collectables. The segment saw sales increase 10.5% to $157.3 million, with continued growth of trend items in both domestic and international stores.

“We’ll continue to get better at that piece of the business through inventory optimization and expand the assortment of exclusive products that our customers desire,” Sherman said.

At the same time, GameStop is divesting interest in Simply Mac, with a sale of the unit expected in the second quarter and melding the ThinkGeek.com business within the company’s branded “omni-channel” experience.

Sherman is looking to generate a $100 million operation income improvement while cutting debt more than $350 million. He also wants to better leverage the company’s 60 million PowerUp Rewards members.

“We’re evaluating new revenue streams and how we can and should participate in the digital economy, particularly given the significant number of loyal customers we bring the publishers and console makers,” Sherman said. “This will take time but is a necessity to enable us to continue maintaining our position as the leader in the video game space.”

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, says that despite ongoing consumer shifts away from packaged media, majority demand still exists.

“We don’t expect the next console cycle to eliminate physical discs altogether,” Pachter wrote in a note. “Consumers still value physical games for their portability, ease of gift giving and the ability to trade them in for value at GameStop. Notwithstanding dire pronouncements about the imminent demise of physical media, our covered game publishers still sell over 50% of their console games in physical form.”