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Black Friday deals are arriving earlier this year, as U.S. consumers continue to face persistent high prices. With inflationary pressures still weighing on shoppers, retailers are responding by offering earlier discounts in an effort to attract price-sensitive customers.

When examining the data across various sectors, it’s clear that most retail categories have experienced a decline in both discount penetration (the proportion of merchandise on sale) and average discount rates. In fact, many sectors are seeing their lowest discount levels since 2016, according to a collaboration between LSEG and Centric Market Intelligence.

However, two sectors stand out for offering stronger discounts this year: the Specialty sector and Department stores. Notably, the Specialty sector has bucked the overall trend, increasing both its discount penetration and average discount percentage compared to previous years.

Despite the earlier promotions, however, the discount penetration of U.S. Online retail has dropped to 35% in November. This marks the lowest discount penetration for November since we began tracking this data in 2016.

Exhibit 1: U.S. Online Retail: Discount Penetration: 2019 – Nov 2024

Source: Centric Market Intelligence

Furthermore, the average discount on merchandise has also decreased, dropping from 39% in November 2023 to 34% in November 2024. This suggests that retailers are becoming more strategic with their discounting, focusing on fewer items and offering more measured reductions in order to protect margins.

Exhibit 2: U.S. Online Retail: Average Discount: 2019 – Nov 2024

Source: Centric Market Intelligence

LSEG holiday sales forecast

Looking ahead to Q4, the LSEG U.S. Retail and Restaurant Index is expected to show a modest 1.5% revenue growth compared to last year’s levels. However, the estimated earnings growth rate is expected to grow 5.1%.

Our metrics show that seven of 10 consumer-related industries have turned negative (Exhibit 3). Of the 195 retailers tracked by LSEG, the Broadline sector is headed for the highest earnings growth rate, largely driven by Amazon’s strong performance. During the holiday season, consumers often travel to visit family and friends and tend to favor dining out. Therefore, the Hotels, Restaurant and Leisure sector is headed for the second highest earnings growth rate in the fourth quarter, recording a 4.5% growth over last year’s level.

Exhibit 3: The LSEG Retail Earnings Growth Rate – Q4 2024

Source: LSEG I/B/E/S

Amazon is boosting the the Broadline sector, and its stock is also up 30% for the year. Accordingly, our StarMine data shows that Amazon ranks in the top decile on the StarMine Smart Holdings, Short Interest and Analysts Revisions models (Exhibit 4). The retailer scores a notable 97 out of 100 on the StarMine Smart Holdings Model. This suggests that buy-side analysts are increasingly optimistic about Amazon, as evidenced by the StarMine Smart Holdings Model, which highlights key investor concerns. Notably, Amazon’s high return on equity (ROE) and analysts’ bullish sentiment make it a compelling investment choice. The online retailer is profitable and therefore is attractive to the buy side.

Moreover, the StarMine Analyst Revisions Model predicts future revisions and price movement, with Amazon scoring 91 out of 100, indicating a bullish outlook. Its high score suggests that analysts are bullish on the online giant and have been revising estimates upwards. Finally, the Short Interest Model indicates that investors are not betting against the company.

Exhibit 4: Amazon StarMine Model Scores

Source: LSEG Workspace

Sold-out rate by sector

The Specialty group is one of the sectors with a high average discount penetration and average discount. Given consumer demand for value, these aggressive promotions are helping merchandise sell out quickly (Exhibit 5). Overall, the number of sold-out items in November 2024 has increased across all sectors compared to last year’s holiday season.

Please note, “sold out” includes items that went completely out of stock at any point during that period, even if they were then restocked – it is still counted as sold out.

Exhibit 5: Sold-Out Rates By Sector 2019 – 2024

Source: Centric Market Intelligence

Among the top sold-out categories are jumpsuits and rompers (20%), dresses (19%), and skirts and skorts (17%) (Exhibit 6). They have all come up from last year’s levels.

Exhibit 6: Top Sold-Out Categories, November 2024

Source: Centric Market Intelligence

Specialty Sector

The specialty sector remains the most promotional, with discount penetration rising sharply from 57% last year to 62% this Black Friday. The average discount has also increased to 25%, surpassing pre-pandemic levels. This suggests that more than half of the merchandise in the specialty sector is being offered at a discount, indicating a highly promotional environment aimed at driving sales.

Exhibit 7: Specialty Sector Discount Penetration: 2016 – 2024

Source: Centric Market Intelligence

The average discount is also still elevated at 25%. Consequently, in this Black Friday, 64% of the merchandise in this sector is on sale, with an average discount of 25%, surpassing pre-pandemic levels.

Exhibit 8: Specialty Sector Average Discount: 2016 – 2024

Source: Centric Market Intelligence

Mid-tier department store sector

Department stores remain one of the most promotional-driven sectors in retail, and this holiday season is no different. Although it has declined from a year ago, the average discount in this sector continues to be one of the highest in the industry. For Black Friday, discount penetration is at 59%, a sharp decline from 75% last year. This marks the lowest level of discount penetration for the sector since 2016, suggesting that retailers are managing their margins more effectively.

Exhibit 9: Department Store Sector Discount Penetration: 2016 – 2024

Source: Centric Market Intelligence

Additionally, the average discount in 2024 is 17%, significantly lower than the 28% seen in 2019, highlighting a shift toward more measured discounting.

Exhibit 10: Department Store Sector Average Discount: 2016 – 2024

 Source: Centric Market Intelligence

U.S. Mall Stores

Consumer shopping behavior has shifted since the pandemic, with shoppers pushing back against persistent high prices and increasingly seeking everyday low values. As a result, U.S. mall stores are ramping up promotions to attract foot traffic, just in time for Black Friday week. This week, approximately 43% of online merchandise from U.S. mall stores is on sale. However, the discount penetration for Black Friday is lower than last year’s 50.0%.

Exhibit 11: U.S. Mall Stores Discount Penetration: 2016 – 2024

Source: Centric Market Intelligence

The average discount for U.S. malls this year is 14%, down from 18% last year, indicating a less promotional environment compared to 2023.

Exhibit 12: U.S. Mall Stores Average Discount: 2016 – 2024

Source: Centric Market Intelligence

Premium sector

Luxury retailers saw a significant spike in discounting during the 2020 pandemic, reaching the highest levels since 2016. However, the trend has reversed this year, with both discount penetration and average discounts falling to their lowest Black Friday levels. Currently, discount penetration is at 22%, down from 26% last year.

Exhibit 13: Premium Sector Discount Penetration: 2016 – 2024

Source: Centric Market Intelligence

Meanwhile, the average discount is 9%, slightly below last year’s 10%. This suggests a more restrained approach to discounting in the premium sector as luxury brands focus on maintaining brand value and margins.

Exhibit 14: Premium Sector Average Discount: 2016 – 2024

Source: Centric Market Intelligence

Beauty sector

The beauty sector has traditionally discounted fewer items at lower average discounts, compared to apparel and accessories. Last year, Black Friday week saw a rise in discount penetration to 22%. Heading into Black Friday 2024, however, only 3% of beauty merchandise is on sale, with an average discount of just 1%. This remains in line with long-term trends for the sector, which typically sees more stable pricing strategies.

Exhibit 15: Beauty Sector Discount Penetration: 2016 – 2024

Source: Centric Market Intelligence

Holiday season summary

In summary, retailers have started their holiday promotions earlier this year. However, they are being more cautious with their discounting, offering the lowest discount levels seen since pre-pandemic times. The Specialty sector will offer the most aggressive discounts, followed by department stores. Within the Specialty sector, apparel is seeing the deepest markdowns. In contrast, the Premium and Beauty sectors are being more selective with their discount offerings.

Despite this, the Broadline sector is still set for the highest earnings growth, primarily driven by Amazon’s performance. The Hotel, Restaurant and Leisure category is expected to see the second-highest earnings growth this holiday season. Given consumers’ preference for value, they will likely gravitate toward stores offering the best deals.

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