State Of The Consumer Ahead Of Black Friday… And Markets Into Year End 11/27/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square this is fast money. Here's what's on tap tonight. The consumer on the clock as we count down to Black Friday. Stocks hovering near record highs. Consumer confidence is climbing and gas prices this year lower than last year. So is all this a setup for a great holiday shopping spree? We'll debate that. Plus, Bitcoin boom or bust. Thanksgiving's been a critical time over the years for crypto. From the 2017 December double to the 2020 Turkey Day massacre. We'll ask the traders what they expect to happen this year. And later, we'll take the wraps off of our stocks.

0:34The stocks our desk is thankful for and the turkeys that are haunting them as they get set to carve up their holiday feasts. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Grasso, Karen Feinerman, and Guy Adami. And we start off with the countdown to Black Friday, just one day left until the most anticipated shopping event of the entire year. And what a difference a year has made for the markets. Stocks hovering near record highs, with the S &P now up more than 30 percent since last Thanksgiving. Gas prices across the country, they're lower than last year by about 20 cents a gallon.

1:05Not a huge difference. And inflation has dropped from 3.2 % to around 2.6%. Again, better, but not a massive change. Same story for mortgage rates. They barely budged year over year. Credit card rates still sitting at about 20%. And unemployment has climbed a bit, but still near historic lows. So why has consumer confidence been on the rise? Should investors be feeling bullish about the holiday shopping season? That is upon us, Guy. Hello, Mel. Hello, Guy. It's an intimate group here today. Yes. People should be. I mean, I wish I was more optimistic, and people clearly are. And if you were to look at the market or the retail landscape through the lens of American Express, all-time high today.

1:44MasterCard Visa, all-time high today. Walmart, all-time high. Costco within a whisper. You'd be like, my God, things are going great. And it's true on one side of the equation there are. There's a flip side of that coin as well. Look at the dollar stores. Kohl's today making a multi-year, I think, four-and-a-half, five-year low. So you talk about a bifurcated retail environment. You're seeing it right here. My concern is credit card debt now approaching one point two trillion dollars. Twenty three percent rate is the average of people are paying and delinquency rates are now at a 13 year high.

2:14That's the other side of the coin. But right now, people feel great about things. Plus, you have the election behind you and Trump not to get political. Trump was favored on the economy. Fifty five to forty five percent or whatever the number was thereabouts by 10 percent. Walmart, guys' point, 75 % of the revenues are from higher income earners, probably trading down. I don't know if that's necessarily a good thing or bad thing. It is what it is. People feel as if they have some closure behind them. We had a lot of major events that were happening. Things seem to be simmering down now, which is a tailwind for confidence in my opinion.

2:49And we know the Fed is on a rate-cutting path, regardless of what mortgage rates are doing. There is hope to come still for the consumer. Right. Right. Although I think Steve's point is really important. I think people, the markets and people hate uncertainty. Yes. And so regardless of what you want it to happen, there is clarity there. I think that's good. I also think that there is. Remember how skittish retail the shoppers seem to be in that fourth and not the back to school quarter. I think that's behind us now. I think also the market has risen a lot. That makes people feel better, wealthier.

3:23And so a lot of things I think are setting up nicely, as well as I think that most retailers are positioned pretty well on an inventory standpoint. So I think they can get good margins. So I'm pretty comfortable with the retail setup right here. Right. The thing is that the retailers that have been doing well are or can be considered expensive. Valuation wise. Right, and the ones that have been doing poorly because they cater to the demographic that you said is having more difficulty, like the dollar stores, they are doing poorly. So do you accept this, the bifurcation of the economy, and translate that into what you buy for retail stocks?

3:59I believe that's exactly the case. Despite the valuations. Yeah, despite, well, at a certain point, valuation is going to, but, you know, people have tried to knock holes in the Walmart valuation probably for the last$25 or$30, and that's obviously been unsuccessful. The flip side of that coin is, you know, you're trying to make a cogent argument for Target on valuation. That hasn't worked out. Think about this quickly. Since 2021, when Target made its all-time high, that stock has been cut in half. At the same time, Walmart's doubled in price. Now, the valuations have gone in a similar way. But, you know, to fight it on valuation has been a losing game.

4:31So I do think you trade it that way. At a certain point, the valuations of the dollar stores and Kohl's and Target even, throw that in the mix, are going to be too compelling to pass up. We're just not there yet. If you believe that the consumer is on the path of doing better, that things are better for the consumer, then isn't it time for a target? Because shouldn't those discretionary items do better? They can sell more pillows and lamps and whatever it is they sell that people don't want right now. I think we're still on that marketplace where you started the question, the guy of buy the winners.

5:00Right. So Walmart expensive. But when you look at Karen brought up inventories, Burlington, Ross Stores, TJ Maxx, all the companies that benefit off of poor inventory management, their stocks are straight up. So those are the names that people are going to for the bargains, along with buying Walmart. They also are the places people want to go for to find that something special. So if you have a higher income, you go there and you can buy something that is or was a luxury good that is now marked down. And so there's perceived value there. I guess it's the same as that. You know, we talk about the wealthier customer going to Walmart, the wealthier customer going to TJX.

5:36And it used to be something you would hide. And now, you know, it's sort of a badge of honor. So I'm long TJX. I like TJX. But I actually think Target is interesting here. And I just think that, you know, the PE differential between Walmart, which I own, and they've done a fantastic job, is just too big here. Now, we know that Target has had some problems with inventory, actually. Yes. In the most recent quarter. In the most recent quarter, trying to get ahead of tariffs. But I just, I think, I don't know, the valuation is really low. Could it go lower? Of course. But I think the bar is pretty low for them now.

6:11Would you say the same? For Target, the bar is extraordinarily low. But they've set that bar themselves. I mean, so many of their problems are Target-specific. They just haven't, I mean, respectfully, they just haven't really operated all that well for the last three years. They've zigged when they should have zagged. They seemingly figured it out about six or nine months ago, only then to fall back prey some of the mistakes they made a couple years ago. So I think they're in the penalty box for a while, although I can understand if you wanted to start to build a position, it makes sense. I'm glad Steve mentioned TJX.

6:39That's the other name, obviously, another all-time high today. Look, at a certain point, valuation is going to get in the way. I think it's close to 28 times next year's numbers, but that probably still has to room some grow on the upside despite the elevated valuation. Did you know that the holiday shopping season is like a week short, that Thanksgiving is apparently late? You've been telling me this. I mean, yes, yes, Thanksgiving. So because of that compressed timeline, there is a thinking that Amazon is the ultimate beneficiary. Anybody who's got great shipping that can get it there faster because consumers are under the gun and they kind of get their gifts really fast.

7:13Yeah, I think there's something to be there's a case to be made for that. I'm not sure. I think I think the retailers will use that as an excuse when they can or use it as a tailwind when they can. Amazon will likely use as a tailwind. But think about how our shopping patterns and habits change from the pandemic. Do you buy in bulk still? Some things, right? Yes. Costco off the charts, literally. And when you look at the valuation on this, you probably don't find it attractive on valuation. I've been wrong for I don't know how many hundreds of points. Exactly. And then the same thing with Walmart and Sam's Club.

7:49So our shopping patterns have changed. Where we shop shop have changed as well. And I think that's for the foreseeable future, unfortunately, for the dollar stores and the lower tier names. I've always thought, though, that it doesn't matter how long or short it is. I know retailers say it does. Maybe it does. There's the psychology of it. It's still the 25th of December. That does not change. And those people who wait until the 24th, they've been waiting until the 24th. Do you think there's people who wake up on the. Two days to do it or four. And on the 26th, do you think people wake up like, shoot, I missed it this year.

8:23Those same ones. Right. Exactly. Every year. Again. It happened again. Right. Hopefully Tim Seymour is watching. Tim went. He went to Florida with his family. Yes. He's watching when Karen speaks about the 24th shopper. Right, right. That's Tim. We've already discussed this on the air, in fact. I'm just saying. He's known to go to the drugstore. So Tim's got a lot of time left. He's got a lot of time. Yeah. Our next guest sees a blowout holiday shopping season ahead with deal days like Black Friday set to play a bigger role this year. Naveen Jaggi is America's president of retail advisory services at JLL.

8:52Naveen, great to have you with us. Good to be here. Thanks for the invitation. We were just talking about online shopping, but you think consumers are going to go back to the stores and droves? The consumers are going to continue to go back to the stores and droves. We are a society that likes to shop at the store. We had a little blip in 2020 and 2021, but I think all the numbers have shown now for the last three years. When we're given a chance to go and have a positive retail experience with retailers that give us a positive experience in the store, we're going to shop in the store. We still, for the most part, like to shop at the grocery store in person.

9:23That won't change. I don't think it's going to change for the near future. And so to me, I'm a big better when it comes to the brick and mortar retail component of our industry. What sorts of stores are giving the consumer a great experience in the store? Well, at the moment, as your guests have spoken about Walmart, I think Walmart has nailed it on the head. They continue to find ways to keep people coming into the store for their daily goods and their daily needs. I think Target, which one of your speakers spoke about, is one that they're not so pleased with. I'm going to still believe at the end of the day that Target is a retail I will bet on.

9:51And the reason why I say that is because every major retail category needs to have not just one but two big players. So whether it's Home Depot versus Lowe's or whether it's Albertsons versus Kroger, you still have these retailers that need a second competitor to drive that interest into the store. So I look for Walmart and Target to be head and head in 25 and 26. Target will get their merchandising business in shape. And I look forward to that as being one of the bright lights for 25. Naveen, it's Karen. Thanks for being on today. So we know that shoppers did change during the pandemic, right?

10:21You had to just e-commerce was the only way, really. So do you think that that penetration has stabilized? Or, I mean, many retailers still think there's ways to go for e-commerce. But it sounds like you don't agree with that. I think, look, the U.S. as a broad average number is about 22 % to 23 % online shopping. And that's not just pure play online. That's just basically shopping online. You may make your decision online and go pick it up at the store. I don't see that number moving much more towards 25 % to 30 % in the next two or three years. We, as a community of consumers in the U.S., still like to go into the store.

10:56And we saw that in 21. As soon as the door started opening up, we saw the malls starting to get people back in the store. And at the end of the day, I think because we have an ease to get to the store, unlike the urban environments that we see in Europe, in the U.S., for the most part, we can easily get to a parking lot, park our car, walk inside the store, and get what we want. And that ease of access and logistics to getting into the stores makes it easy for us to think about shopping. We're still a car community. Until we get in our car, move to the store, that's what drives our decisions to go to the store.

11:26I'm a big believer that the brick and mortar is the place where we will continue to shop. Naveen, by the same token, so we heard what you like and we heard who's doing the right things. Who's doing the wrong things? And is it possible to turn those around? Or are we just watching that pinnacle, that pyramid, get smaller and smaller at the top of the retail organizations that actually can figure it out or have figured it out? I think the department store sector overall is the one that's having a hard time getting the consumer back in the store. And that's probably a lot to do with the fact that all the other retailers we've talked about, whether it's Walmart or Target and others, have done a better job of merchandising to get the quality product in their stores.

12:06So to me, whether it's a Kohl's, for example, or Nordstrom pivoting to Nordstrom Rack, I think to me that is an example of a retailer that said, we've given up on our name brand and moving towards the discount rack, which now to me says that they've essentially said that the average U.S. shopper will trade down to TJX and Walmart and Nordstrom Rack as opposed to trading up. And so basically now you have this barbell effect, which your previous speaker spoke of, which where you have the luxury and the aspirational, they get the consumer, and the discount in value gets the other consumer. And as a result, the middle, the mighty middle, the JCPenney's of the world, Sears, Kmart's, those legacy retailers, they're just not getting the consumer anymore.

12:43That to me tells me that that departmental sector is the one that's most vulnerable towards weakening as opposed to strengthening. Are we seeing that translate? And I mean, and forgive me if this is something you can't answer directly, but JLL is an advisory firm when you assess the value of real estate. So in terms of, you know, what the rents are for leases? Are they more expensive when you have a Walmart as your main anchor tenant as opposed to a Kohl's? Well, I can't answer that directly because there's a different way to ask that question and think about the situation we're in in the country today.

13:18We're an all-time low in terms of supply for quality retail real estate, 40-year low in terms of delivery. So all of the quality retail real estate being delivered to the market today is more expensive than it was two or three years ago. So any retailer in America today is saying, we've got to make a deal. We're delivering 14 million square feet of retail space in 25. 14. What does that mean in context? Back in the heydays of 2006, 7, 8, and 9, we delivered over 100 million square feet per year. So we're so low on inventory delivery for all the reasons that we know, inflationary costs, labor costs, interest costs, that we're not delivering that kind of product.

13:52As a result, whether you're Abercrombie & Fitch or you're Walmart, whether you're The Gap or Lululemon, Retail real estate today is more expensive than it was three years ago. So you're going to have to make the move on the deal you want as opposed to waiting for the rates to come down. They won't. Really interesting. Naveen, thank you. Great to see you. Naveen, Jaggi, happy Thanksgiving. Thank you. All right. So what's our trade here? You were off Friday last week. Yes, I was. Good for you. You deserve it. Thank you. We have Stephen Yaloff here, the CEO of SKT. Yes, of SKT. Of SKT. Yes. And we had a great conversation with him.

14:23He actually put up a pretty bullish case for the consumer. But malls, you know, well, not malls, but his space specifically. And there's some room to the upside there without question. And then he just mentioned Kroger. Take a look at that chart if we could put up like a three or four year chart. That 62 level, which we're approaching, was the level we saw a couple years ago. So they report on December 5th. I think a little trepidation into the quarter is necessary. All right, let's get to the great getaway. The great getaway ahead of the holidays with record travel numbers expected for Thanksgiving weekend.

14:51Could it give the airline some extra lift? Phil LeBeau is here with all the latest. Hey, Phil. Hey, Melissa. We'll talk about that chart a little bit more in just a bit because it really does signify what the airlines are seeing and the business, how strong it is right now. We are seeing relatively smooth lines at most of the airports around the country. I just did a check-in in terms of where the major delays are. Yeah, there's a few pockets here and there around the country. Nothing major. That is exactly what the airlines want to hear. They're expecting travel to be up about 6 % year over year.

15:25This is going to be the busiest Thanksgiving ever. And to prepare for it, let's show you that chart again. The airlines have added more flights for this 10 days, if you will, that wrap around Thanksgiving. The big push yesterday, today, you'll also see it on Sunday, more than 50 ,000 flights on Tuesday. So as a result, when you're looking at more than 3 million people flying back on Sunday, who are the airlines that benefit the most? Well, they're all going to benefit to a certain degree, but you really have three right now as you head into the holidays that are outperforming the others. United and Alaska.

16:00Take a look at these two over the last six months. Both of these stocks hit near, or they are near 52-week highs. They hit them earlier this week. Then you have Delta. It also has had a nice run over the last, at least the last three months, And they had their investor day last week forecasting 10 % earnings per share growth annually over the next three years. And then you've got three other major airlines that all are still dealing with issues. And while they have moved a little bit higher over the last several weeks, they're not benefiting to the same degree as their competitors. And we're talking about JetBlue, Spirit is also in, well, Spirit's in bankruptcy, American, and I've got one more in there.

16:41I can't even see it right now. Southwest. So there you go. Those are the threes that have their own specific issues that they're dealing with. Bottom line is this, Melissa. The airlines need a strong holiday, a clean holiday. That's what they're getting so far. Yeah. The weather, though, is not going to cooperate. And are staffing issues still still a problem when it comes to staffing the control towers? Well, United's not happy about it. And they've made that very clear yesterday. They said that the problems with regard to staffing for Newark is limiting their ability to execute as much as they could.

17:17They could be doing even better. But they say that, you know, you have the staffing issues there. That's a long running problem that perhaps, perhaps could be resolved within the next year or so. But United's not been happy for some time. They still are not happy with that staffing. Yeah. Phil, thank you. Phil LeBeau. You bet. You saw that chart with United. It's basically doubled, more than doubled since August lows. I mean, it's insane. It's up 150-something percent year-to-date. Delta's behind that. And to Phil's point, Alaska is the third place. If you're going to invest, for me, it's either going to be United or Delta.

17:52And people are going to think United is overdone. So they'll probably go to the lower-tier ones, and they'll get burned. Same way that we're talking about retail. Stick with it. Stick with the winners. Even United, though, I've got to think. I mean, a lot of good news is priced in. already. You're 100 % right. But over the last week and a half, two weeks, I forget who, but somebody put a$150 price target on the stock a week and a half or so ago. UBS just initiated $139 price target. That's a 44 % upside from here. So a lot of people are very optimistic. Delta is the one, though. I mean, I think UBS put a$88 price target.

18:24That's the one, I think, reasonable valuation still. And if we can get through this sort of 65 level, which was prior high, 88 is probably in the crosshairs. All right. Coming up, Bitcoin bounces back. The cryptocurrency recovering most of its losses after yesterday's sell-off. But with a history of volatility right around Thanksgiving, will this year keep up the holiday tradition? We'll debate that. But first, a Black Friday bet on the blitz. Whether you're shopping or watching football, Amazon has you covered how they're playing the entire field and hoping it's a boom for their ad business. More on that when Fast Money returns.

18:55Back in two.

19:05Welcome back to Fast Money on Friday. Amazon Prime will stream the NFL matchup between the Las Vegas Raiders and the Kansas City Chiefs, Taylor Swift's favorite team. Julia Vorsen joins us now with a look at what this game means for the e-commerce and media giant. Julia. That's right, Melissa. Amazon's second Black Friday NFL game already looks like a success. Selling out of ad inventory in August, that's months earlier than for last year's inaugural game. 40 % of advertisers in this game are new, and they're reportedly paying as much as$750 ,000 for a 30-second spot. Now, ratings are expected to grow from last year's 9 million viewers, on the heels of Thursday night NFL ratings growing 11 % from last year and 38 % from two years ago.

19:50And Amazon is rolling out more interactive ads, enabling customers to shop directly from commercials with a QR code or with a remote, which Amazon sports chief Jay Marine tells us was a huge success in last year's Black Friday game. Now, this is all part of Amazon Prime Video's growing commitment to sports. The NBA, WNBA, and NASCAR debuting next year, joining Amazon's NFL rights. This is the company looks to grow the ad demand for Prime Video, which just launched ads on its basic tier earlier this year. Now, Amazon's Jay Marine tells me that they are always looking for more ways to invest in sports rights.

20:31Melissa? In terms of the shoppable ads bringing in revenue, Julia, are there benchmarks that analysts are looking for? I mean, compared to last year, did they ever release any benchmarks? And is this all part of the forecasts that analysts Wall Street might have for the streaming, the ad supported to your business specifically? Well, look, we've seen a big push towards ad-supported streaming from all these different players. Amazon most recently launched ads on their basic tier of Amazon Prime Video earlier this year. You had Netflix with ads. All of the different platforms that started out ad-free now have an ad-supported tier because that allows them to generate two revenue streams and offer streaming content at a lower price point.

21:12In terms of what this means for Amazon, they are clearly uniquely positioned to benefit from ads in their content. One thing that Jay Marine told me was that last year, the shoppable ads had 280 % higher engagement than for a regular game because it was Black Friday and people were looking to shop. So it really makes sense to have these games on Black Friday when people are thinking about shopping on Amazon because they already have your credit card number. If you see something you like, they make it really easy to click through and buy. And they're able to close the loop in a way that when it comes to traditional TV or even streaming television, they're working on making things more shoppable.

21:52We just saw an announcement from Walmart and CNBC's parent company, NBC Universal, about creating more shoppable content for Walmart. But shoppable content is definitely the future shoppable ads. And Amazon really has everything lined up for Black Friday. Julia, thank you. Julia Borsten. What are the chances, guy, that you buy something while you're watching a streamed NFL game? What are the chances you're watching a Ranger game tonight? Zero. That's the answer. There's no chance. Plus, you have a tube television. Of course I do. Which is going to make it difficult. I don't even know how to QR code.