U.S. Halloween retailing in 2020 and 2021 was spooked by the pandemic. Last year, supply issues left shoppers with empty shelves at big box stores such as Target, Home Depot, and Walmart. This year, however, there’s been a 27% increase in the amount of Halloween home merchandise online, and a 61% increase in Halloween costumes and accessories, as Refinitiv discovered in a collaboration with StyleSage. Moreover, October to-date, 10% of the Halloween apparel online is completely sold out.

Although Halloween merchandise has been selling out faster this year, luckily for procrastinators, there still seems to be more Halloween items available online.

For the most part, consumers still prefer to do their shopping in stores. During its last earnings call, Home Depot said it pre-released Halloween product and “saw just great success in the early launch and all set in stores in the upcoming weeks and look forward to that category performing.” (Source: Home Depot Q2 202 earnings call)

Historically, consumers spent more on candy, followed by Halloween decorations, then costumes. So, let’s dig in deeper into the data, and see who’s poised to have a fun or spooky Halloween this year.

Trick or treat

Mondelez International (MDLZ), the maker of Sour Patch and Cadbury chocolate, is on track to post stronger revenue than in the previous three years. This suggests that its candy continues to be a favorite during the Halloween season (Exhibit 1).

Exhibit 1: Mondelez and Hershey Revenue and Earnings Results/Estimates: 2019 – 2021

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Source: Refinitiv I/B/E/S data

Similarly, Hershey (HSY) is on track to post stronger revenue compared to its pandemic and pre-pandemic levels (Exhibit 2). The same can be said for earnings as the legendary chocolate maker’s Q4 earnings are expected to show a 64.1% growth from pre-pandemic levels.

The chocolate maker is in the top quartile, for the Price Momentum model. The StarMine Earnings Price Momentum Score for Hershey is 94, indicating that the company has positive stock price momentum in its favor (Exhibit 2). What’s more, the Credit Text Mining, Combined, and Structural Models are all in the top decile.

The Credit Text Mining Model applies sophisticated text mining algorithms to Eikon’s company events conference-call transcripts, financial statements and other regulatory filings, Reuters News and select broker research reports to identify language that is predictive of credit risk.

Hershey scores a strong 92 on this model. However, its Credit Risk Smart Ratio is not as strong and suggests its leverage ratios could use some improving. Still, the Credit Structural Model score of 100 suggests that the company is unlikely to default on its debt obligation over the next one-year period.

Exhibit 2: Hershey’s StarMine Model Scores

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Source: StarMine

Tootsie Roll Industries

Tootsie Roll is another favorite Halloween candy and has been in business for over a century. Its stock price has been up 29.2% this year, and for the most part has generally outperformed the S&P 500. Moreover, StarMine’s Price Momentum Model (Price Mo) shows that Tootsie Roll’s performance in this area is above 81% of its peers (Exhibit 3).

In addition to having stock Price Momentum in its favor, the candy maker is also in the top quartile for the Earnings Quality Model, suggesting earnings are coming from sustainable sources. Moreover, the company performs much better in the Credit models. It scores a 85 out of a possible 100 in the Credit Smart Ratios model.

This is the most comprehensive StarMine credit model, as it combines the power of StarMine’s three credit risk models – the StarMine Text Mining Credit Risk Model, the StarMine SmartRatios Credit Risk Model and the StarMine Structural Credit Risk Model – to generate our single, final estimate of public company credit risk.

Exhibit 3: Tootsie Roll StarMine Model Scores

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Source: StarMine

Halloween discounts

In collaboration with StyleSage, Refinitiv discovered that there’s been a 61% increase in Halloween costumes and accessories items online from one year ago, which is higher than the 42% increase seen in 2021. Despite this, the discount penetration, which means the percentage of Halloween-related costumes and accessories on sale, has come down significantly to 56% from last year’s 69% levels (Exhibit 4).

The average discount for Halloween costumes & accessories is 15%. This is below last year’s 19% and the pre-pandemic levels of 17%. Thus, there’s more Halloween apparel this year, and a smaller portion of this merchandise is on sale. Its average discount level is also lower, suggesting retailers are betting that strong customer demand will support margins.

Exhibit 4: Average Discount and Discount Penetration for Halloween Costumes & Accessories

Source: StyleSage Co.

Apparently, demand is stronger than in previous years. October to-date, 10% of the Halloween apparel online is completely sold out, which is still higher than its pandemic (6%) and pre-pandemic levels (3%) (Exhibit 5).

Exhibit 5: October Sold-Out Rates 2019 – 2022

Source: StyleSage Co.

Likewise, there is significantly more Halloween home décor merchandise online this year compared to the pandemic, when there were stay-at-home orders and lockdown restrictions followed by supply issues. Since last year, there’s been a 27% increase in Halloween home merchandise online.

Despite the considerable increase in merchandise, the average discount penetration — the percentage of Halloween décor merchandise on sale — has remained stable vs. last year. Though, it is still higher than its pre-pandemic level of 44% (Exhibit 6).

The average discount is slightly higher this year going into the holiday weekend, as retailers try not to hurt their margins too much in the face of higher inflation. For procrastinators, this means same home decoration discounts compared to previous Halloweens.

Exhibit 6: Average Discount and Discount Penetration for Halloween Home Decorations 2019 – 2022

Source: StyleSage Co.

Party City

In the latest earnings call, Party City said it remains cautiously optimistic on Halloween. The retailer hired 20,000 team members in preparation for the spooky season. This year, it plans to operate 130 to 150 Halloween City stores, which is up from last year’s 90 stores (Source: Q2 2022 Party City Earnings Call, Aug 8, 2022).

Conversely, analysts polled by Refinitiv suggest that Halloween sales at the party goods retailer look spookier this year vs. last (Exhibit 7). Q4 revenue is on track to drop -2.6% vs. last year. Moreover, its current Q4 earnings estimate, which includes the Halloween holiday, is still below its pre-pandemic level.

Exhibit 7: Party City Revenue and Earnings Results/Estimates: 2019 – 2022

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Source: Refinitiv I/B/E/S data

The StarMine data show that Party City scores in the bottom quartile for most StarMine models. It is evident that analysts have become more bearish on this stock as the Analyst Revisions Model scores a 14 out of a possible score of 100, placing it in the bottom quartile. The model is highly predictive of both the direction of future revisions and price movement.

Likewise, the Value-Momentum (Val-Mo) model (Exhibit 8) incorporates two other valuation methods: Intrinsic and Relative Valuation models, where Party City also scores in the bottom quartile. The StarMine Value-Momentum (Val-Mo) model suggests that Party City ranks in the bottom 2% of all stocks in its region, making the stock appear expensive.

Moreover, StarMine models caution that the company has credit issues. Its Credit Risk – SmartRatios Model score has deteriorated from a year ago but is still a weak 3 out of a possible 100. This model looks at accounting ratio analysis, utilizing both financial statement data and forward-looking analyst estimate data via the StarMine SmartEstimate.

Exhibit 8: Party City StarMine Model Scores

Source: StarMine

Spooky or Fun

In general, there is more Halloween merchandise online this year than last. However, when it comes to costumes and accessories, there is less of it on sale, and the discounts are lower than previous year. Meanwhile, the average discount on Halloween Home Décor has remained somewhat in line with the previous two Halloweens.

Although higher inflation continues to plague consumers, it has not stopped them from celebrating Halloween, as online Halloween merchandise is selling out faster than the pandemic and pre-pandemic levels. Given fewer discounts, it looks like retailers might be able to maintain healthy margins.

Moreover, the Refinitiv I/B/E/S and StarMine data indicate that candy makers may not be too scared when they look at their bottom lines.

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