BAC Data Was Good

We are starting to get holiday sales data which tells us the true health of the consumer. Initial results are great for online shopping and terrible for in-person shopping which is what we expected. The chart below shows the only data that was positive heading into the holiday shopping season besides the NRF prediction. 

As you can see, BAC aggregate card sales were up 9.1% yearly in the week of November 21^st. You wouldn’t expect such solid results because of the spreading pandemic and the rising jobless claims. Of course, initial claims have been less reliable than usual because of reporting delays and fraudulent claims. Therefore, anything is possible. Top half of the populace isn’t doing badly as the housing market and stock markets are on fire. Plus, it’s cheaper to work from home.

Thanksgiving & Black Friday

Thanksgiving Day foot traffic in brick and mortar stores was down 95% from last year. On the other hand, online sales were up 21.5% to $5.1 billion. If people decided to avoid seeing extended family on Thanksgiving, they surely weren’t going shopping. 

Plus, they had more time to shop online because they weren’t with their family. Retailers that offer curbside pickup had a 31% conversion rate on their sites. Retailers are changing their store layout as they expand the portion of the store for pickup of online orders.

In the NRF projection, they anticipated 20% to 30% online sales growth. Therefore, the results have been decent so far, but not amazing. Black Friday was almost the same as Thanksgiving as online sales growth was 21.6% as there were $9 billion in sales. Spending on smartphones was up 25.3% to $3.6 billion or 40% of online sales. As smartphone screens get bigger, people do more transactions on them.

Online grocery and personal care product sales were up 397% and 556%. That’s probably people stocking up on products they would normally buy anyway because of deals and the latest spread of the virus. Online spending on pet products was up 254% as more people got pets as they stayed in their houses more. 

As a result, Chewy and Freshpet stocks are up 162% and 130% year to date. Spending at stores fell 52.1% on Black Friday as the holiday rush didn’t happen.

Amazon Versus Shopify

Amazon is on a relentless hiring binge, which ironically lowers its demand for labor in the future. It lowers its demand because the higher cost of labor implies a greater benefit from limiting labor by using robots in warehouses. The firm obviously already uses robots, but their use will only increase in the next few years. Jobs created now will probably be gone 10 years from now.

Specifically, Amazon AMZN hired 427,300 people around the world this year. As of 2019, Target had 359,900 employees. Amazon added over a Target just this year. It hires 1,400 people per day. Its total workforce is 1.2 million. Walmart has 2.2 million employees. 

It will be interesting to see if Amazon catches Walmart WMT before robots take over employment. Because there will be much less growth in online shopping, Amazon will hire much fewer people in 2021. Therefore, it’s unlikely Amazon catches Walmart in the next 3 years. In one week, 384,000 people applied to jobs at Amazon because the labor market has been rocked by the crisis. Many jobs shifted to firms who benefit from the shutdowns.

As you can see from the chart above, Amazon and Shopify SHOP stocks have almost perfectly matched each other. Amazon is a way better business because of its cloud business. Since Shopify is a clear bubble stock that temporarily benefited from the shutdowns and euphoric speculation, it’s not a stretch to say Amazon will experience very sharp volatility when the cloud/online retail bubble bursts. Amazon, Netflix, and Apple are the most vulnerable of the FAAMNG stocks.

Pizza The Most Protected In COVID Economy

COVID-19 economy has ravaged most independently owned restaurants. Looking at the types of food served, pizza has been the least hurt by the new economy. As you can see from the chart below, less than 15% of restaurant closures were pizza places. This means COVID-19 has been a boon to big chains and a perfect windfall for pizza chains.

Darden is down 3.8% year to date as it owns a few chains such as Olive Garden. That doesn’t sound great, but compared to the out of business mom and pop joint, this is amazing. Pizza stocks have done way better. Papa John’s stock is up 28% year to date. Domino’s is up 34% as it is the best of breed in terms of technology. 

Delivery technology is even more important in the social distancing economy. On the other hand, the hardest hit restaurants were those that serve breakfast and brunch. People aren’t commuting to work, so they don’t need a quick coffee and bagel on the go. Brunch is a social gathering that doesn’t work in a socially distant world.

COVID-19 Update

The COVID-19 data is mostly manipulated by Thanksgiving. However, hospitalizations continue to hit new record highs. There are now 96,039 people in the hospital because of the virus. The great news is the vaccines are coming in the next few weeks. In mid-December, California will be getting 327,000 doses of vaccines.

December will be the beginning of the end of the virus, but we don’t expect the data to get significantly better until January or February. The chart above shows developed countries will be the first to get vaccines. That’s great for America because it has been hit hard. 

South Korea and Australia are in good shape without the vaccines. Brazil and India really need the vaccines. While India’s deaths peaked in mid-December, 486 people still die per day. 518 people die per day in Brazil. Furthermore, the 7 day average of new cases is rising again. It has gone from 16,139 on November 5^th to 35,468 as of November 30^th. Deaths should increase in what is the summer for Brazil (southern hemisphere).