More U.S. Halloween merchandise is selling — despite inflation

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By Jharonne Martis

US Halloween retail in 2020 and 2021 has been spooked by the pandemic. Last year, supply issues left shoppers with empty shelves at big-box stores such as Target, Home Depot and Walmart. This year, however, there has been a 27% increase in the number of Halloween home products online and a 61% increase in Halloween costumes and accessories, as discovered by Refinitiv in a collaboration with StyleSage. In addition, from October to date, 10% of online Halloween clothing is completely sold out.

Although Halloween merchandise has sold out faster this year, luckily for procrastinators, there seems to be even more Halloween merchandise available online.

For the most part, consumers still prefer to shop in-store. On its latest earnings call, Home Depot said it had pre-released the Halloween product and “had great success in the early launch and it’s all hitting stores in the coming weeks and looking forward to the release.” performance in this category”. (Source: Home Depot Q2 202 earnings call)

Historically, consumers spent the most on candy, followed by Halloween decorations, then costumes. So, let’s dig deeper into the data and see who’s about to have a fun or spooky Halloween this year.

charity please

Mondelez International (MDLZ), the maker of Sour Patch and Cadbury chocolate, is on track to post higher revenues than in the previous three years. This suggests that her candy continues to be a favorite during the Halloween season (Exhibit 1).

Exhibit 1: Mondelez and Hershey (HSY) Revenue and Earnings Estimates/Revenues: 2019 – 2021

Revenues and profits of Mondelez and Hershey

Source: Refinitiv I/B/E/S data

Similarly, Hershey’s is on track to post higher revenues relative to its pandemic and pre-pandemic levels (Exhibit 2). The same can be said for earnings, as the legendary chocolatier’s fourth-quarter earnings are expected to show 64.1% growth over pre-pandemic levels.

The chocolatier is in the first quartile, for the Price Momentum model. The StarMine Earnings Price Momentum score for Hershey is 94, indicating that the company has positive stock price momentum in its favor (Exhibit 2). Additionally, the Credit Text Mining, Combination, and Structural models are all in the top decile.

The credit text mining model applies sophisticated text mining algorithms to conference call transcripts of corporate events, Eikon financial statements and other regulatory documents, Reuters News, and select research reports of brokers to identify the predictive language of credit risk.

Hershey gets a solid 92 on this model. However, its smart credit risk ratio is not as strong and suggests that its leverage ratios could be improved. Still, the Structural Credit Model’s score of 100 suggests that the company is unlikely to default on its debt over the next one-year period.

Exhibit 2: Hershey’s StarMine Model Scores

Hershey's StarMine Model Scores

Source: StarMine

Tootsie Roll Industries (TR)

Tootsie Roll is another favorite Halloween candy and has been around for over a century. Its stock price has risen 29.2% this year and has generally outperformed the S&P 500. Additionally, StarMine’s Price Momentum Model (Price Mo) shows that Tootsie Roll’s performance in this area is 81% higher. that of his peers (Exhibit 3).

In addition to having the Price Momentum stock in its favour, the candy maker is also in the top quartile for the earnings quality model, suggesting earnings are coming from sustainable sources. Additionally, the company performs much better in credit models. It scores 85 out of a possible 100 in the Credit Smart Ratios model.

It is the most comprehensive StarMine credit model, combining the power of all three of StarMine’s credit risk models – the StarMine Text Mining Credit Risk Model, the StarMine SmartRatios Credit Risk Model, and the StarMine Structural Credit Risk – to generate our final single estimate. credit risk of public enterprises.

Exhibit 3: Tootsie Roll StarMine Model Scores

Tootsie Roll StarMine Model Scores

Source: StarMine

Halloween Discounts

Working with StyleSage, Refinitiv discovered that there was a 61% increase in Halloween costumes and accessories online compared to a year ago, which is higher than the 42% increase seen in 2021. Despite this, rebate penetration, meaning the percentage of Halloween-related costumes and accessories on sale declined significantly to 56% from last year’s levels of 69% (Table 4).

The average discount for Halloween costumes and accessories is 15%. This is down from 19% last year and pre-pandemic levels of 17%. So there’s more Halloween apparel this year, and less of that merchandise is on sale. Its average discount level is also lower, suggesting that retailers are betting that strong customer demand will support margins.

Exhibit 4: Average Discount and Discount Penetration for Halloween Costumes and Accessories

Average Discount and Discount Penetration

Source: StyleSage Co.

Apparently, the demand is stronger than in previous years. From October to date, 10% of online Halloween apparel is completely sold out, which is still above its pandemic (6%) and pre-pandemic (3%) levels (Figure 5).

Exhibit 5: October 2019 – 2022 stock-out rate

Fares exhausted for October 2019-2022

Source: StyleSage Co.

Likewise, there are many more Halloween decor products online this year compared to the pandemic, when there were stay-at-home orders and lockdown restrictions followed by supply issues. Since last year, there has been a 27% increase in Halloween homeware items online.

Despite the huge increase in merchandise, average discount penetration—the percentage of Halloween decoration merchandise on sale—remained stable compared to last year. However, it is still above its pre-pandemic level of 44% (Table 6).

The average discount is slightly higher this year as the holiday weekend approaches, as retailers try not to hurt their margins too much in the face of higher inflation. For procrastinators, that means the same discounts on home décor from previous Halloweens.

Exhibit 6: Average discount and discount penetration for Halloween home decorations 2019-2022

Average Halloween discount, discount penetration rate

Source: StyleSage Co.

Party Town (PRTY)

In the latest earnings call, Party City said it remained cautiously optimistic for Halloween. The retailer has hired 20,000 team members in preparation for the spooky season. This year, it plans to operate 130-150 Halloween City stores, up from 90 stores last year (Source: Q2 2022 Party City Earnings Call, August 8, 2022).

Conversely, analysts polled by Refinitiv suggest that Halloween sales at the party supplies retailer look spookier this year compared to last (Figure 7). Fourth quarter revenue is on track to decline -2.6% year over year. Moreover, its current fourth-quarter earnings estimate, which includes the Halloween holiday, is still below its pre-pandemic level.

Room 7: Party Town Results/Revenue and Profit Estimates: 2019 – 2022

Party Town Revenue, EPS

Source: Refinitiv I/B/E/S data

StarMine data shows that Party City is in the bottom quartile for most StarMine models. It is evident that analysts have become more bearish on this stock as the analyst revisions model scores 14 out of a possible 100, putting it in the bottom quartile. The pattern is highly predictive of both the direction of future revisions and price movement.

Similarly, the Value-Momentum (Val-Mo) model (Figure 8) incorporates two other valuation methods: intrinsic and relative valuation models, where Party City is also in the bottom quartile. The StarMine Value-Momentum (Val-Mo) model suggests Party City ranks in the bottom 2% of all stocks in its region, making the stock look expensive.

In addition, StarMine models warn that the company has credit problems. Its Credit Risk Score – SmartRatios Model has deteriorated from a year ago, but remains low at 3 out of a possible 100. This model examines the analysis of accounting ratios, using both financial statement data and forward-looking estimate data from analysts via StarMine SmartEstimate.

Exhibit 8: Party City StarMine Model Scores

Party City StarMine Template Sheet Music

Source: StarMine

scary or funny

In general, there are more Halloween products online this year than last year. However, when it comes to costumes and accessories, there are fewer on sale and the discounts are lower than the previous year. Meanwhile, the average discount on Halloween Home Décor remained somewhat in line with the previous two Halloweens.

Although rising inflation continues to plague consumers, it hasn’t stopped them from celebrating Halloween, as online Halloween merchandise is selling out faster than pandemic and pre-pandemic levels. With fewer discounts, it looks like retailers might be able to maintain healthy margins.

Additionally, Refinitiv I/B/E/S and StarMine data indicate that candy makers may not be too scared when looking at their results.

Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.