Early Start to the Holiday Shopping Season in Physical Stores
Event
Shopify and Adobe provided updates on Black Friday sales.
Impact: SLIGHTLY POSITIVE for LSPD; MIXED for SHOP
Lightspeed read-through: Slightly positive. Adobe estimates that Black Friday online sales in the U.S. reached ~$8.9bln, in line with its estimate of $8.8bln-$9.2bln, but slightly below last year's $9bln. Adobe attributes this to consumers returning to physical stores and retailers starting promotional programs as early as September to cope with the tight supply chain. The current supply-chain challenges and shipping delays may have also driven consumers to visit stores to ensure that they had gifts in time for Christmas. The Dow Jones reports that in-store traffic is up 48-61% y/y and Mastercard's preliminary data showed a 43% growth in in-store sales. As we noted in the past, we believe that Lightspeed will be a strong beneficiary of shoppers returning to brick-and-mortar stores. Of course, the Omicron variant risks ongoing and/or resumption of lockdowns, but if this wave is comparable with previous ones, we expect merchants to reopen and consumers to return to stores, as we have seen throughout this year. In our view, merchants are far more prepared for another wave than they were at the beginning of the pandemic and vaccination rates are higher than in previous waves (assuming that current vaccines provide some protection against Omicron).
Shopify read-through: Mixed. Shopify set another Black Friday sales record of $2.9bln, up 21% y/y, despite a tough y/y comparable when sales grew ~75% y/y due to lockdowns. Shopify's Black Friday y/y growth is relatively in line with our 22% y/y GMV growth estimate for Q4/21, but is below consensus at 28% y/y growth. This is not necessarily a negative read-through as the holiday shopping season may have started earlier this year, with volume spread out to occur earlier in the quarter. This was reflected in Shopify claiming that volumes started recovering in August and September. Previous Black Friday/Cyber Monday sales-growth metrics have also been a poor indicator of Shopify's Q4 GMV y/y growth. Shopify saw strong sales in the U.S., the U.K., and Canada. Average cart value also increased to $101.20 from $90.70 y/y.