I think it is safe to say that Black Friday deals are not what they once were. Many shoppers would hold out on spending to take advantage of the discounted items available at many retailers. I remember looking through online ads, emails, and posts and would find something for everyone. Then, over the weekend passing the retail holiday, I would ask my extended family and friends what they went out to get and ended up buying. This year though, my emails had deals but they didn’t really seem like the deals I had grown accustomed to seeing. In fact, according to a WSJ article, many retailers are not going to provide deals like in previous years. The article goes on to explain average discount prices through the Labor Day weekend had fallen across various categories at the online discount website, Brad’s deals. The company commented that they expect reduced discounting through the holiday season and expect discounts to apply to items that are overstocked. According to Suzanne Kapner, WSJ’s retail reporter, other retailers have made use of data and artificial intelligence to strategically limit discounts. If retailers are cutting the number of sales available, will these moves limit companies’ sales and profits?

Retailers aren’t the only companies that make up the S&P 500, but S&P 500 companies have been citing the same issues that retailers have been experiencing in the past months, supply chain issues. According to FactSet, of the companies that have reported earnings through the end of last week, 342 companies have cited supply chain issues during their earnings call. Given the high number of companies mentioning problems with their supply chains it is fair to think that companies’ earnings will not fare as well in the coming quarter. Yet, earnings estimate for the fourth quarter have moved very little. Estimated earnings margins are down to 11.8% from the record 12.9% reported for the third quarter of 2021, and only one basis point down from the estimate of 11.9% at the start of the third quarter earnings season.

Supply chain issues and increased costs will likely take some clever navigating by management to maintain the record levels of profits we have seen this year. Analyst price-to-earnings estimates (how much an investor is willing to pay per dollar of earnings) are pointing to limited growth for the S&P 500 with forward 12-month S&P 500 P/E estimate down at 21.4, from the current 28.9. Still, the forward estimate is above the 10-year and 5-year average for forward price to earnings, all while earnings are expected to continue growing over the next twelve months. The Apriem team will be looking for sales other than at storefronts. We will keep a close eye on any companies that move into the discount category with a solid financial standing that we find at reasonable valuations.

Whether you Black Friday shop or not, the Apriem family and I hope that you can get your hands on any on-sale items you have been eyeing. Personally, I want to avoid long lines and crowds, so I will be doing my shopping from the convenience of my own home. I would also like to remind everyone that now is the time to indulge in hobbies, spend time with loved ones, and take vacations. The holidays are a wonderful time to step away from your routine, recharge, and reflect on what you are grateful for. I know I will be relaxing, enjoying the presence of my family, and watching golf, one of my favorite pastimes.

As a reminder, Apriem Advisors will have the following revised hours for the upcoming Thanksgiving holiday:

Tuesday, November 23rd – Close at 4 p.m. PST
Wednesday, November 24th – Close at 2 p.m. PST
Thursday, November 25th – Offices Closed
Friday, November 26th – Offices Closed

Jose Rendon