2 Day Overview – Provided by Dimisi LLC

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JPMorgan

  • Weekend follow-through solid again in 2010. On Friday morning traffic appeared flat to up modestly, on average.
    • Impressed by the solid follow-through to later in the day Friday and for most of the day Saturday.
    • Customers adding more items to their baskets this year including e-readers and apparel.
  • Black November. There are three considerations in gauging sales this past weekend.
    • 1st: Many retailers stretched out their promotions to earlier in November to drive sales
    • 2nd: On-line shift continues and free shipping seemed to be expanded across retail this year.
    • 3rd: 2008 and 2009 were noticeably different compared to their prior years while 2010 is more subtle.
  • When viewed with the solid follow-through and basket commentary above, we remain confident in our forecast for a 3% increase in core retail sales in November and December. Moreover, the early holiday sales trends indicated that the consumer is feeling a bit better and the correlation to positive back to school sales remains strong.
  • Dick’s – Stands Out
    • Traffic and sales consistently strong over the weekend. The retailer benefited from colder weather conditions, which swept across much of the country this past week and aided apparel and outerwear categories.
    • Branded merchandise including Northface, Nike, and Under Armour led demand.
  • Best Buy – Taking a Risk: Walking a fine line by balancing fewer promotions (may have hurt sales) against better margins.
    • On Friday morning, traffic appeared flat to down driven by a lack of a compelling doorbuster line up (particularly vs. WMT), more promotions throughout November (designed to spread out sales), and less of an electronics focus for consumers this holiday.
    • De-emphasized the number of DVD bins on the floor.
    • Silver lining may be that the traffic follow-through beyond Friday morning was solid and the mix and promotional changes suggest BBY was successful at driving gross margin.
    • Overall: we saw nothing that dissuades us from our (1.0%) domestic comp and +50 bps gross margin growth estimates for 3Q.
  • Home Depot & Lowes
    • Surprise over the weekend was Home Depot’s stepped up promotional activity (particularly in appliances) compared to both Lowe’s and Sears.
    • Overall, we believe both HD and LOW had a solid weekend.
  • What’s Hot:
    • Sporting Goods, TVs at WMT, e-readers, tablets, wireless, Macs, and appliances at HD.
  • What’s Not So Hot: PCs, TVs at BBY, gaming, and iPods (and we can probably just get rid of the GPS area).

BofA/Merrill Lynch

  • Traffic on Black Friday was strong in the morning, in response to door-buster sales and various promotions.
  • Estimate Black Friday alone represents 6- 8% of holiday sales:
    • Consumer Electronics drew the heaviest foot traffic.
    • Once the promotions ended (mostly at noon), saw a significant drop in traffic in the PM on Friday.
    • Saturday & Sunday Traffic solid, although well below Black Friday levels, as expected.
  • NRF’s (National Retail Federation) sales forecast of +2.3% for the 2010 Holiday season compares to a 10 year average of +2.5%.
    • LY according to NRF, sales increased 0.4%.
  • ICSC (International Council of Shopping Centers) estimates Holiday sales will rise 3-3.5% in 2010.
  • ShopperTrak and Deloitte:
    • Expect holiday sales to increase 2.9% and 2%, respectively.
  • Promotions were aggressive:
    • Prior to Black Friday in an effort to entice shoppers even earlier in the Holiday season.
    • Many stores opened earlier on Black Friday than ever before in an effort to lure shoppers early (Toys R Us opened at 10 PM on Thanksgiving Day). There is clearly an aggressive push to capture share of wallet.
    • Many retailers shifted “door-buster” sales to earlier in the November period in an effort to attract shoppers earlier than past years.
    • Consumers responded to promotions earlier in November than in past years.
    • On-line trend: Consumers are not waiting for Cyber-Monday (Monday November 29th), but rather purchasing on-line in response to promotions earlier in November.

Credit Suisse

  • Cooler Weather, Earlier Promotions, Consumer Confidence Improving: No Excuses This Month
  • CS View.
    • Hearing positive commentary on MTD sales trends from most retailers during earnings season, expectations for November have been set high.
    • Momentum last Wks of October carried over into November and Black Friday went relatively well
    • Strong response: larger screen TV’s, small home related electrics
    • Customers
      • shopping closer to need, opened up their wallets as the weather turned cooler and Black Friday deals began trickling in earlier than usual.
  • Concern – level of promotional activity required to drive sales:
    • With broadline retail inventory growth exceeding sales growth for the first time since the downturn began in 2008 and retailers taking an aggressive stance on promotions, profitability could show less positive leverage relative to prior months.
    • Overall, November should be in line with expectations with a few upside surprises given shopping catalysts at both ends of the month.

Citibank

  • Black Friday Store Checks: Solid Traffic Trends YOY
    • Office products retailers have significantly increased their focus on CE products
    • Best Buy, Sears, etc. held earlier pre-Black Friday sales this year
    • Retailers focusing on bundling and offering services such as free delivery for online purchases over relatively low thresholds (typically from $30 to $100.).
    • Williams-Sonoma is offering free shipping for a year for $30.
    • CE Door Buster sales were slightly less promotional than last year: average Door-buster discounts at BBY are 37.6% vs. 41.2% last year.
  • Traffic Improves, but Higher Sales of Lower Ticket Items Could Offset Comp Gains
    • Traffic was higher versus LY in most of the retail locations we visited, however higher sales of low ticket items (less focus on FPTVs, and more gaming) was a potential offset.
    • Observed Strongest Traffic at Best Buy: long lines at store opening and registers
    • Better than expected traffic: OfficeMax and Staples.
    • Lower Traffic: Home furnishings retailers had relatively lower traffic, likely due to fewer promotions and traditional focus on CE.
  • Sales – Expect Nov Wk 4 mall traffic of +3-5% (as cooler weather could offset a harder comparison) vs. +2.66% YOY in Week 3 and a +6.69% increase in Week 2 this year (ShopperTrak).
  • Retailing Hardlines Holiday View
    • Winners this holiday season as stronger players separate themselves from the pack with winning brands and trend-right product, strong value offerings, and relatively stronger margin expansion opportunities. More modest promotional levels, and increased value assortments should help.

UBS

  • Early indications: holiday off to good start, driven by deep promotions
  • Black FridayTraffic:
    • Crowds drawn by aggressive doorbusters
    • Drop off in Friday pm/rest of weekend traffic (as promotions remained in line with Friday pm)
    • Many retailers began promoting earlier in the week, which may have pulled forward some BF sales.
    • Internet Sales: healthy gains
  • Mall Winners:
    • ANN, Hollister, Gap/Banana Republic, Victoria’s Secret
    • TGT & WMT: remain confident in improved sales performance – though still early.

Morgan Stanley

  • Expect Strong November – Despite flattish Black Friday (BF) results
    • Month of Nov: likely to be very strong due to pent-up demand and favorable weather.
    • More promotional TY vs. LY with higher retailer inventories y/y, we could see a more promotional December as well.
    • Remain cautious on December w/ adverse weather and calendar (Saturday Christmas could pressure SSS by ~1%).
  • Nov Mall Traffic: +5-7% vs. Slight Decline LY:
  • Strong BF promos and cooler Nov. weather brought more shoppers into the mall y/y (w/ increased traffic each wk).
  • Weather Trends International, Thanksgiving Wk was to be the coldest since 2003 (aiding seasonal apparel sales).
  • Lining Up Even without Major Promotions:
  • Line Count Winners: 200+ people on line at Urban, despite relatively insignificant promotions; A&F and Hollister also had robust traffic. Gap and Banana Republic drove traffic w/ whole-store promos.
  • BF Sales Increased to $45Bn Driven by Higher Thanksgiving Day and Early Bird Shoppers: according to NRF.
  • Number of shoppers rose +8.7% and the average consumer spent +6.4% more than LY.
  • BF Promotions Mostly Higher vs. LY: PLCE, JCG, TLB, A&F, Hollister, Chico’s, Gap, BR and Loft all promoted more aggressively TY vs. LY. KSS and M opened one hour earlier vs. 2009, and JCP and KSS both added more Black Friday specials y/y.

Wedbush

  • Softlines Space: observed teen retailers garnering the bulk of traffic during the Black Friday weekend, followed by children and Missy retailers.
  • Traffic: consumers turned out for the Black Friday specials, but traffic decreased significantly over the weekend as discounts lessened. We believe consumers’ focus on price points (#1 store determinant according to our 2010 Holiday Survey) benefited select retailers with a strong pricing strategy.
  • Our Holiday Survey of 1,044 consumers nationwide:
    • 19% (vs. 15% LY) of consumers to start their holiday shopping during the Thanksgiving weekend, traffic significantly increased from earlier on in the month with select retailers offering “door buster” deals for a limited time driving the most traffic and conversion.
  • Inventory Levels: well positioned to capitalize on the increased traffic with most retailers highlighting seasonal items such as fleece, hoodies, outerwear, and sweaters.
  • ShopperTrak, Traffic rose by 2.2% but sales only rose by 0.3% to $10.7 billion on Black Friday.
    • Mall traffic rose 6% prior to 11/25 and maintains its +3.2% holiday sales forecast.
    • By region, Northeast and Midwest regions of the country showed the strongest gains in sales, with 1.7% and 0.4% increases, respectively, over last year. The West posted no increase, while the South saw sales fall 0.3%.