Interactive Investor

Black Friday could smash records and boost these stocks

24th November 2020 08:37

Graeme Evans from interactive investor

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It’s been a miserable year for the high street, but savvy retailers hooked up to the net are flying.

Love it or loathe it, the American import of Black Friday will this year have more than usual importance for investors in stocks as diverse as Dixons Carphone (LSE:DC.), Royal Mail (LSE:RMG) and ITV (LSE:ITV).

The annual shopping frenzy signals the start of a make-or-break festive period for many companies in the retail industry, particularly those desperate to recover lost ground or shift unsold stock following a year of unrelenting Covid-19 disruption.

Empty shopping streets, however, mean that most will have to entice customers through just their online operations. Unlike in France, where companies including Amazon have agreed to put back the shopping event until December 4, retailers will need to compensate for the current closure of physical stores in England and parts of Scotland.

Internet industry body IMRG thinks the way the pandemic has fundamentally reshaped the retail landscape this year will mean that online sales jump by between 35% and 45% year-on-year in Black Friday week, which started on Monday 23rd.

It has already reported sales growth of 61% in the first week of November, the highest year-on-year rate since June and the fourth-highest this year.

This is partly a sign that shoppers have heeded messages to bring forward some of their festive purchasing to avoid delivery backlogs too close to Christmas. This is also likely to have made them more responsive to Black Friday campaigns.

IMRG managing director Justin Opie believes November is well on track to become a record-breaking month for online retail.

He added: “It is important to remember that while Black Friday is still the peak shopping day of the year, its stand-alone significance is waning as Black Friday has evolved into a month-long sales period. Good news for retailers trying to manage this high demand.”

This represents a welcome boost for FTSE 250 index listed Royal Mail, which now generates more revenues from delivering parcels than it does letters. It reckons this Christmas period will be its busiest yet as shoppers have started purchasing gifts earlier.

Some in the retail sector note Black Friday is looking more like Black November as many retailers have taken the opportunity to spread out discounts across a number of days.

In the past, shoppers would have queued early on the Friday morning to snap up cut-price televisions or game consoles before online shoppers took their turn on the following Cyber Monday.

The fact that offers are being spread across November is also good for media companies like ITV, Daily Mail and General Trust (LSE:DMGT) or Reach (LSE:RCH), whose television channels, web pages and newspapers carry advertisements for the promotions.

Even the telecoms companies are getting in on the act. Both BT (LSE:BT.A) and TalkTalk Telecom (LSE:TALK) are offering three months of free broadband and making other tweaks to contract length and pricing. Meanwhile, Vodafone (LSE:VOD) and Virgin Media are running price promotions.

AO Lets Go!

In the key battleground of electrical appliances, AO World (LSE:AO.) this week had a Black Friday saving of 42%, or £1,700, on the sale of a top-of-the-range Samsung 85 inch 4K television normally costing £3,999. Among the other 871 deals listed on its website on Monday, the online retailer offered a 21% saving on an Apple Airpod and charging case costing £159.

For AO World CEO John Roberts, the past six months of trading have been like no other time during his two decades in the business, with the closure of his competitors' bricks-and-mortar stores driving heightened levels of trade to his website in the first lockdown.

Shares recently hit a record 420p, having been 64p in early May, after a trading update in October revealed UK sales jumped 54% in the six months to 30 September.

The challenge for Roberts is to ensure that those new customers stay with the company, particularly amid fierce competition for Black Friday custom. One of AO World's biggest rivals is Currys PC World owner Dixons Carphone, whose stores are currently only open in Wales, Northern Ireland (until Friday) and parts of Scotland.

All of its Black Friday deals have been moved online, with the retailer promising more deals and stock as a result this year. The company's ShopLive feature will enable customers to video call in-store experts from home to seek advice or ask product questions.

Last year, Currys PC World dealt with 125,000 orders on Black Friday, working out at two a second, with a record 385,000 online shoppers visiting the site between 9-10am. Almost half of orders were made via mobiles, peaking in terms of traffic at 6am.

ASOS battles Boohoo

In other retail sectors, AIM-traded fast fashion chains ASOS (LSE:ASC) and Boohoo Group (LSE:BOO) are set to continue their rivalry by offering “big juicy discounts” on Black Friday and Cyber Monday. The valuation of ASOS, in particular, has soared during the pandemic after its operations successfully adapted to the staying-in fashion trends and shift towards casual wear.

JD Sports Fashion (LSE:JD.) is another company whose share price has recovered well after putting back almost all the losses seen during the London market's March sell-off. JD is promising its biggest ever Black Friday event, with up to 50% off trainers and other products.

For the fashion retailers, this year's Black Friday is one of the final opportunities to offload seasonal stock and avoid the need for painful write-downs in New Year trading updates.

Stock management at Next (LSE:NXT) has been aided by its successful online operation after full-price sales rose 23.1% in the third quarter to 24 October, compared with a 17.9% decline for its shop estate. It estimates that a two-week lockdown in England, Scotland and Northern Ireland in November has the potential to reduce full-price sales by £57 million.

Marks & Spencer (LSE:MKS) outperformed its Covid-19 planning in the six months to 26 September, leading to reduced stock levels year-on-year. It does not participate in Black Friday but was this week offering 40% off on selected homeware and 30% off some womenswear.

For Primark owner Associated British Foods (LSE:ABF), there will no opportunity in many parts of the country to attract Black Friday shoppers. It does not have a retail website, with more than half of its total selling space temporarily closed from 5 November.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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