"Outside the mall, we believe off-price continues to gain share this holiday, with particular momentum in the home and beauty categories, and likely helped by weather compares; we look for strength across BURL, ROST and TJX," MKM Partners' Managing Director Roxanne Meyer wrote in a note today.
In addition to heightened promotions, colder weather throughout the East Coast and Midwest likely served as a needed and incremental positive catalyst this weekend compared to last year, Meyer noted. This could drive sales in gifts and seasonal items such as sweaters, outerwear and cold weather accessories.
Meanwhile, RBC Capital Markets' recent annual holiday survey results support the consumer's quest for value and off-price merchandise, which is a positive for TJX, Ross Stores, Burlington Stores, Kohl's (KSS - Get Report) and Gap's (GPS - Get Report) Old Navy brand.
"From a market share perspective, we note that TJ Maxx was the second-place winner (34%), with Ross Stores close behind (26%), then Burlington (22%). The strong showing of off-price in the survey suggests the customer's ongoing draw to value," the firm wrote in a note. Kohl's was the mindshare leader with 41% of survey takers indicating their intent to shop the retailer this holiday.
Overall, RBC believes the consumer still remains cautious, especially in terms of self-gifting, is price motivated and less compelled to spend more money on apparel. The survey results also suggested consumer preference for non-apparel, which supports Ulta Salon, Cosmetics & Fragrance (ULTA - Get Report) , L Brands (LB - Get Report) and Signet Jewelers (SIG - Get Report) .
Additionally, next weekend's "Super Saturday," which is the last Saturday before Christmas, is expected to be the biggest shopping day of the holiday season, surpassing Black Friday, MKM's Meyer said.
Thanksgiving Day and Black Friday online sales rose 17.7% to $5.27 billion year-over-year, according to data from Adobe. Black Friday set a new record with $3.34 billion in sales, up 21.6% from last year. Online sales on Thanksgiving Day totaled $1.93 billion. Adobe's report is based on aggregated and anonymous data from 22.6 billion visits to retail websites.
Season to date, MKM has been surprised to see more than half of its retailers with promotions elevated over last year, even with lean inventory levels entering the fourth quarter across the industry and despite easy margin comparisons vs. last year.
"We believe the outcome for margin performance in 4Q will remain a wildcard for specialty retailers, with Lululemon Athletica (LULU - Get Report) the only retailer where we feel confident in (sizable) margin gains," Meyer added.
Kohl's is held in the Dividend Stock Advisor portfolio. See all of the holdings with a free trial.