Retail Callouts (12/1): TGT Site Issues & KSS Online Stats, Cyber Monday

Takeaway: Target website crashes again, while WMT plans another 1.1bn e-com investment next year. KSS Thanksgiving Week Stats - High Y2Y Usage.

TGT - Target website crashes again. WMT investing $1.1bn in e-comm. How much does TGT need to spend to catch up?

(http://nypost.com/2015/11/30/targets-website-crashes-on-busy-cyber-monday/)

Our Take: This is the 2nd time this year that TGT experienced website outages. The good news is that traffic volume was the highest the company has seen all year by a factor of 2x, driven by a 15% off all website purchases promotion amongst other Cyber Monday deals. The bad news -- TGT online sales account for only ~3% of the annual sales volume and the company is looking to grow this channel at a 40% CAGR over the long term (something it's been unable to do in year 1). It's pretty obvious that TGT, who has been the perennial laggard in this channel ever since it took it's dot.com business in house from AMZN in 2011, needs to invest in the backend in order to grow this channel, which in our mind means margins are going down. That won't be cheap especially in light of the $1.1bn WMT has already committed to spending next year.

KSS - Thanksgiving Week Stats - High Y2Y Usage

(http://phx.corporate-ir.net/phoenix.zhtml?c=60706&p=irol-newsArticle&ID=2118967)

Our Take: These stats are important, though there is no historical context to contextualize the numbers that KSS released yesterday, but here are a few of the key ones.

1) 600 million page views over the 7 day period through Thanksgiving, Black Friday and the Holiday weekend. Based on other streams of data we know the total visitor count was ~61mm consumers calculated using 10 page/visits per user. That means the conversion rate was less than 5%.

2) We know the bargain hunting/price sensitive customer shops on Black Friday, which is especially the case at KSS. That, we'd argue, explains the high Y2Y ratio. Especially given the fact that Y2Y shoppers were given 20% off entire purchase coupons and free shipping over $25 (usual shipping discount is $75).

3) Non-credit sales have outcomped credit sales in 2 of the past 3 quarters (no disclosure on last call), which is notable in that the Y2Y rewards program was in year one of its nationwide rollout. Credit has carried the comp for the past 5 years plus as the program went from 50% of sales to 60% keeping SG&A artificially low. Based on the 70% Y2Y usage stats during Thanksgiving week, we'd expect to see some credit cannibalization as shoppers double up on points using the rewards program 20% discount and cash back offers, etc. on National credit cards instead of the KSS card.

Cyber Monday Results:

Retail Callouts (12/1): TGT Site Issues & KSS Online Stats, Cyber Monday  - 12 1 2015 chart1 D

B&M Store Sales Fell 4.7% Over Thanksgiving Weekend As Traffic Continued to Decline

(http://www.prnewswire.com/news-releases/store-sales-fell-47-over-thanksgiving-weekend-as-traffic-continued-to-decline-300185824.html)

AMZN - Devices sales strong over Black Friday Weekend

Fire tablet sales this holiday shopping weekend up more than 3x year over year

Amazon Fire TV sales on Amazon this weekend up more than 6x year over year

(http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=2119025

UA -  Navy unveils new uniforms and custom helmets for each position

(http://www.si.com/college-football/2015/11/30/navy-football-new-uniforms-custom-helmets-photos-army)

Retail Callouts (12/1): TGT Site Issues & KSS Online Stats, Cyber Monday  - 12 1 2015 chart2