The American Consumer Is Setting Records

Pumpkin pie and guns... The American consumer is setting records... But malls are still dying... Tomorrow is your last chance for Stansberry's Big Trade... How Wal-Mart is battling Amazon... A holiday offer on our favorite gift...

The American consumer is hungry...

He's hungry for TVs... Retail giant Target (TGT) said it sold more than 3,200 TVs per minute the first hour it opened on Black Friday.

Guns, too... The National Instant Criminal Background Check System (an FBI service) processed 185,713 transactions on Black Friday – a record number of gun background checks, which gave gun stocks a boost today.

And pies... Discount retailer Wal-Mart (WMT) said it sold six pies per second during the month of November.

And, of course, turkey... Wal-Mart also said it moved 150 million pounds of turkey and ham for Thanksgiving.

Black Friday sales hit a new record...

Sales tallied $3.3 billion ($5.3 billion including Thanksgiving Day – an 18% increase from last year).

Cyber Monday sales (the web's answer to Black Friday) climbed 12% from a year ago to $3.5 billion.

Not only is Cyber Monday now bigger than Black Friday... But the web is also winning the battle on the former busiest shopping day of the year.

According to the National Retail Federation, an estimated 109 million people shopped online during Thanksgiving weekend, compared with 99 million people who shopped in stores.

A growing trend...

Drilling down further, mobile shopping – people shopping from their phones or tablets, rather than their desktops or laptops – is making up a bigger chunk of online sales.

As Steve Sjuggerud wrote in today's edition of our free DailyWealth e-letter, more than one-third of this year's Black Friday sales – totaling $1.2 billion – were made on mobile devices.

Online retailer Amazon (AMZN) said sales from mobile phones on Black Friday beat last year's sales from Cyber Monday and Black Friday combined.

Wal-Mart said 60% of its Black Friday online orders came from mobile devices.

In total, mobile phones accounted for 55% of web traffic on Black Friday and 36% of sales, according to Adobe Digital Insights... up from 33% of sales in 2015 and 26% in 2014.

Of course, these trends are nothing new...

Brick-and-mortar retailers are quickly losing ground to their online competitors. And mobile devices are overtaking personal computers.

We've covered these ideas in-depth. (You can read more about them here and here.)

The death of the American shopping mall...

It's one of the big themes Porter and his analysts have discussed in Stansberry's Investment Advisory lately.

They're shorting malls for three reasons:

1. Unprecedented levels of department-store closings.
2. Significant capital burdens for the "survivors."
3. General market "frothiness."

Department stores used to be the anchors for malls. That's what drove traffic. Today, shopping habits have changed. Consumers walk through the department stores to reach the interior stores.

We no longer need a one-stop shop for kitchen, clothing, and bedding. We have the web for that.

And department stores are feeling the heat. In August, Macy's (M) announced it would close an additional 15% of its locations – 100 stores – which is more than it closed in the last six years combined. And Macy's is one of the stronger department stores. It's higher-end.

The important thing to notice here is that the pace of department-store closings is accelerating. And that trend should continue. From the September issue of Stansberry's Investment Advisory...

The Macy's announcement isn't all that surprising given the findings of commercial real estate experts. Four months ago, a report published by the leading commercial real estate research firm Green Street Advisors concluded that retailers would have to close 20% of all anchor space in American malls just to bring productivity back to 2006 levels (as measured by sales per square foot).

Green Street's research concluded that J.C. Penney and Sears would need to shut down 36% of their stores – a total of 620 of their combined 1,700 stores. Nordstrom, Dillard's, and Bon-Ton would need to close another 130 stores. When the Wall Street Journal cited this report in an article, the companies – especially Nordstrom – downplayed the "mass closures" strategy. Macy's, on the other hand, appears to understand the gravity of the situation.

After Macy's announced its mass closures, shares jumped 17% in a single day. Don't underestimate the pressure this puts on the other retail CEOs around the country. Wall Street's message to retail CEOs is clear: close more stores.

It's no surprise that Porter and his team have dedicated an entire segment of Stansberry's Big Trade's "Dirty Thirty" to these struggling retailers – a list of 30 of the most hopelessly indebted (and most likely to default) firms we could find.

On that topic, our charter offer for Stansberry's Big Trade closes tomorrow. So if you've been on the fence, now is the time to sign up.

The future is clear for shopping malls and department stores...

There will be far fewer of them in the future. Hopefully you'll profit from the move.

What's less clear is how some of the world's most dominant retailers (say, Wal-Mart) will compete against the growing threat from online retail – in particular, the dominance of Amazon.

Stansberry's Investment Advisory analyst David Xia dug into the strategy that Wal-Mart – the world's largest retailer by revenues – plans to use to fight Amazon. From David...

In August, Wal-Mart bought web retailer Jet.com, which has been adding 400,000 shoppers monthly and is on pace to sell $1 billion annually.

In June, Wal-Mart sold its Chinese e-commerce business to JD.com (JD) for a 5% stake in the company. Wal-Mart now owns 11% of JD, which is an experienced and growing Chinese e-commerce company. JD has 188 million active users and sold almost $30 billion of goods in 2015. JD's business model is similar to that of Amazon.

Investors are also concerned about Wal-Mart's lack of overall growth. Growth is hard to maintain given that Wal-Mart operates almost 12,000 stores under 63 brands in 28 countries and has annual sales of $482 billion. Yet even under these conditions, Wal-Mart has been growing.

Wal-Mart is now the second-largest online retailer behind Amazon...

And this holiday season, Wal-Mart is bringing the fight to Amazon's door.

Walmart.com carried 66% of the most popular toys on Amazon (which said it sold more than 100,000 toys in the first few hours of Black Friday), up from 46% last year – according to retail software company Boomerang Commerce.

Jet.com, which Wal-Mart owns, also had more overlap with Amazon than last year. And both websites were often selling toys cheaper than Amazon.

Amazon doesn't want to start a price war with Wal-Mart... Wal-Mart knows that game too well. It became the world's largest retailer by strangling competition and grinding down its suppliers' margins.

Earlier this month, Wal-Mart announced third-quarter earnings. The company beat expectations, but comparable-store sales (sales at locations open at least one year) rose by 1.2%, slightly missing forecasts of 1.3%.

But the company's e-commerce segment grew 20.6%, compared with growth of 11.8% in the prior quarter.

David argues Wal-Mart has value even if it fails to dominate Amazon in online sales...

That's because Wal-Mart's core customers don't have the money to shop at Amazon or use Amazon Prime (Amazon's $99-per-year service that provides free streaming music and video and two-day shipping on all Prime-eligible orders). So they'll continue visiting their neighborhood retail giant.

Check out the table below, which shows the average salaries of various retail customers...

Wal-Mart's brick-and-mortar customers make 11% less than Amazon customers and nearly 20% less than Amazon Prime customers. That's a huge difference. As David reminds us...

Wal-Mart's brick-and-mortar business represents more than 96% of the company's total sales. It generated $32 billion of earnings before interest, taxes, depreciation, and amortization (EBITDA) in the most recent 12 months.

Given Wal-Mart's mature business status, a reasonable EBITDA multiple is 8 to 10 times. Assuming $50 billion of debt and $6 billion of cash, that gives a fair value of about $79 a share – a 10% premium to today's price.

On top of this, Wal-Mart announced a $12.7 billion stock-repurchase plan (part of a broader $20 billion plan). A company's stock usually increases in value during share-repurchase plans.

As you can see in the chart below, Wal-Mart shares have slightly outperformed Amazon over the last 12 months...

On the topic of holiday shopping...

Digest readers know that Porter launched his own razor company last year – OneBlade.

Since then, OneBlade has sold more than 5,000 units to folks all around the world. The razor has received awards from prominent organizations like Inc. Magazine, the Industrial Designers Society of America, and the Clio Awards. And it has been featured in publications like TechCrunch, Business Insider, and Fast Company.

So we're excited to bring Stansberry Research readers a limited-time opportunity to get a complete OneBlade holiday shaving kit for 30% off, including a complimentary gift box and free U.S. shipping.

You'll get nearly $200 worth of free stuff with this deal. And you can enjoy an extended 100% risk-free return policy, so there's virtually no risk in purchasing.

It's your chance to give the perfect holiday gift. Or it's simply a great opportunity to buy a OneBlade razor if you haven't purchased yours yet. Just make sure to take advantage of the offer soon... The team expects to sell out fast. Get this limited-time OneBlade holiday shaving kit for 30% off right here.

New 52-week highs (as of 11/28/16): China Vanke (2202.HK), Altius Minerals (ALS.TO), Black Stone Materials (BSM), iShares Select Dividend Fund (DVY), and iShares MSCI Global Metals & Mining Producers Fund (PICK).

Did you do your Black Friday shopping in person or from the comfort of your own home? We want to hear the good and the bad. Send us your experiences at feedback@stansberryresearch.com.

Regards,

Sean Goldsmith
Baltimore, Maryland
November 29, 2016