Retail Stocks Ready To Explode After Strong Start To Holiday Shopping Season?

| November 28, 2011 | 0 Comments

The holiday shopping season kicked off with a bang this past weekend. According to the National Retail Federation, retail sales surged 16% and shoppers spent a record $52.4 billion.

Millions of consumers had no problem cutting their Thanksgiving feasts short to take advantage of earlier store openings and deep discounts. They flocked to stores like Wal-Mart (WMT), Gap (GPS), Toys R Us, and Best Buy (BBY) to cash in on bargain basement prices.

I’m sure many in the retail industry are breathing a collective sigh of relief.

Heading into the biggest shopping weekend of the year, a lot of experts were concerned retail sales would not be as robust as in years past.

And for good reason…

Europe’s sovereign debt crisis is driving the region into recession and threatening to take the entire global economy down with it.  And here in the US, unemployment remains above 9%, Washington’s gridlocked on resolving our own debt crisis, and the fragile economic recovery is in danger of collapsing.

The lesson here… never underestimate the American consumer’s love of getting a good deal.

Heck, one “creative” lady in California even used pepper spray on her fellow shoppers to ensure she got the Xbox she wanted.  Now that’s dedication… or is it fanaticism?

Whatever it is, it shows just how badly Americans are itching to spend this holiday season.

And it’s not over yet.

Today is Cyber Monday.  In case you don’t know, the Monday after Black Friday is now the biggest day of the year for online shopping.  And this year’s Cyber Monday is expected to be the best one yet.

Retail industry researcher ComScore says sales are projected to hit a record $1.2 billion.  A whopping 80% of online retailers are offering discounts this Cyber Monday.  And more Americans than ever are skipping the annual Black Friday brawl to shop from the comfort of their own homes.

It makes sense.

Shopping online has gone mainstream as 77% of American households now have broadband internet service.  Not having to contend with the tortoise-like speeds of dial-up has made online shopping much more enjoyable.

What’s more, the ranks of online shoppers are getting a boost from the proliferation of smartphones and tablet PCs.  With these mobile devices, you can now shop from almost anywhere on the planet.

It used to be you had to run out to a store or two on your lunch break. Not a very efficient way to shop for bargains.  Today, you can use your smartphone or tablet PC to compare prices from hundreds of retailers in the blink of an eye.

No question about it, the convenience made possible by today’s technology is pushing more people than ever to take advantage of Cyber Monday bargains.

So, with all this spending going on, retail stocks are certain to explode right?

Not so fast…

While consumers are smashing Black Friday and Cyber Monday sales records, I don’t think the robust sales trends will continue throughout the holiday shopping season.  The more likely scenario is deep discounts have pulled sales forward from December.

In other words, look for sales to gradually decline as we get closer to the holidays.

Bottom line…

Don’t use the strong start to the holiday shopping season as an excuse to jump into retail stocks.  The debt crises, high unemployment, and slowing economic growth will probably keep a lid on overall spending this year.

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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