Inflation is high, but the consumer is resilient. That fact, along with relatively low unemployment, has apparently been enough to prevent a recession in 2023. However, whether the current environment is investable is up for debate.
In fact, this is the ever-present question for stock traders seeking to capitalize on the strength of the U.S. consumer. However, first it must be established that Americans are actually willing and able to “shop ’til they drop,” as the old saying goes.
As always, the data tells the tale. As it turns out, the data from Black Friday indicates that people are spending freely, so get your shopping list ready, as some retail-sector stocks may be ripe for the picking.
Giving thanks and shopping online
If inflation is crimping people’s spending habits, the data isn’t showing it. On Nov. 23, or Thanksgiving Day 2023, Americans spent a jaw-dropping $5.6 billion shopping online. That’s up 5.5% year over year and represents a Thanksgiving record, according to Adobe Analytics.
For comparison, consider that Americans only spent $2.87 billion shopping online on Thanksgiving in 2017. In other words, the magnitude of online spending on that holiday practically doubled in just six years.
What about big-box stores like Walmart (NYSE:WMT) and Target (NYSE:TGT)? They can’t really be compared to online marketplaces like Amazon (NASDAQ:AMZN) since many big-box retailers closed their physical locations on Thanksgiving.
Nevertheless, Walmart and Target could still garner sales on Thanksgiving through their online stores. Clearly, U.S. consumers were happy to pick up their smartphones and shop via these online stores after enjoying Thanksgiving dinner. Per Adobe Analytics, 59% of online sales took place on mobile devices, which was a record. Furthermore, this represented an astounding $3.3 billion in spending.
A Black Friday spending spree
Thanksgiving yielded a record day of spending, but what about the next day? Of course, Black Friday is generally considered the biggest shopping day in the U.S. Hence, it’s closely monitored by retail industry experts and stock traders.
The news is good, especially if you hoped that the American consumer would be as strong as ever. Like Thanksgiving, Black Friday indicated record spending this year.
Again, we’ll refer to data courtesy of Adobe Analytics. Believe it or not, Americans spent $9.8 billion online during this year’s Black Friday, or Nov. 24. That figure represents a 7.5% increase year over year and a Black Friday record. It also dwarfs Thanksgiving’s $5.6 billion in online spending.
Adobe Analytics analyst Vivek Pandya seemed to suggest that holidays will continue to be important shopping days for consumers and revenue-generating days for retailers.
“The strong online sales momentum for Black Friday this year further emphasizes the staying power the major holiday shopping days continue to have,” Pandya explained.
Here’s what might really surprise you though. Black Monday might not be the year’s biggest shopping day anymore. Adobe Analytics anticipates that Cyber Monday will yield an eye-popping $12 billion in online spending, up 6.1% year over year.
Stock investors: Let the shopping trends be your friend
Given these holiday shopping facts and figures, it appears that buying retail stocks is a fairly safe bet in late 2023 and early 2024. After all, you can’t argue with two days of record-breaking spending.
However, this doesn’t mean you have to buy every retail-sector stock in sight. Consider Nordstrom (NYSE:JWN) as an example. That company’s CEO, Erik Nordstrom, recently warned of “continued uncertainty and softening consumer spend.” That’s not particularly encouraging, so loading up on JWN stock sounds like a risky proposition.
Instead, investors can allow the current shopping trends to work in their favor. The most obvious example would be Barbie dolls, which were strong sellers on Black Friday. Therefore, it could make sense to buy Mattel (NASDAQ:MAT) stock, which is far below its 2013 peak of around $47.
Other big sellers included smartwatches and skincare products. Consequently, investors might choose to take a look at Apple (NASDAQ:AAPL) and Ulta Beauty (NASDAQ:ULTA).
However, the best approach may be to focus on the stores where people purchase products in these trending categories. Thus, investors can add a few shares of Amazon, Walmart and Target to their portfolios.
My personal favorite right now is TGT stock, which still has room to run before it reaches its 52-week high of $181.70. Still, it’s perfectly sensible to diversify one’s portfolio with a few shares of Target, Walmart and Amazon stock as the American consumer continues to be surprisingly strong.
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
