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The Valentine’s Day Effect on the Stock Market

In case you didn’t realize, February 14th is Valentine’s day.  Valentine’s Day, the day that love is in the air.   Many say that the day was made for florists and chocolatiers who benefit from a contingent of males that spend large amounts of money in order to “woo” their significant others.   Others say it’s the day that can make you do crazy things.   But are people crazy enough to plough enough money into certain companies that would reveal a noticeable impact to the company’s stock valuation?

How has the market reacted in the past to this event?

In this report we will look at the key suppliers of this so called holiday; your chocolatiers, your florists, and your jewelry stores.

Chocolate & Candy Manufacturers

Our list of Candy manufacturers is composed of The Hershey Company (NYSE:HSY), Cadbury PLC (NYSE:CBY), and Rocky Mountain Chocolate Factory, Inc. (NASDAQ:RMCF).

Let’s start with the laggard.   Rocky Mountain Chocolate Factory has had a history over the past 10 years of not performing well over this period.   After the sales were all rung in, a dismal 16% of sessions gained the day following Valentine’s Day, and the big day itself only produced 25% of sessions gaining on the session.   Averages for these two scenarios ranged from –1.03% to –1.88%, with extremes on the day ranging from –3% to –9%.   The situation doesn’t improve by opening up the time range to the week before and after, or even the month before and after, with between 40% to 45% of sessions gaining and the more dismal figures coming the week before the key day.   However, there was a glimmer of hope amongst all of the losses.   In the 30 days following, 5 of the 10 periods had large rallies in 2001, 2002, 2005, 2006, and 2008 that generated returns of over 8%, and as large as 27%, in this short time following, averaging a gain of around 4.5%.

The two large players within the Valentine’s game had slightlier more optimistic results.   Hershey advanced in over 85% of sessions the day after and 63% of sessions the day before, compared with Cadbury that benefitted from 57% gaining sessions after and 88% before.   Very reasonable numbers considering the average gain for Hershey the day following was 1.12% and for Cadbury the day before of 1.61%.   Opening up the results and you’ll see that Hershey has also benefitted on the week following averaging a gain of 1.90% with 68% of sessions “sugaring” up a gain.   This is even further optimistic when you look at the average maximum gain to be made of almost 3% if held until the 18th of the current month.   Conversely, Cadbury saw similar “candy coated” figures when you look at the week leading up to the day.   Average gains of 1.92% were seen with over 58% of advancing sessions.   If you kept a leash on the run, you would have seen a gain of 3.12% if you held this security until 3 days before, or February 11.

Flower Suppliers

Our analysis of this industry will focus on one key player within the space.   FTD was acquired not too long ago by an internet company, United Online (NASDAQ:UNTD), leaving isolated data for the flower segment unavailable.   Although in the first year after the acquisition was announced UNTD ended up declining in value by 10% to 25% in both the week and month before AND after the big day.

The supplier we will highlight is 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS).   Lets just say that the stock performance of this key player has not been very “rosy”.   In both the day before and the day after, FLWS gained in approximately 27% of sessions averaging losses of 1.44% to 1.63%.   The week before and after isn’t much better either, with around 43% of sessions advancing and averaging a loss of around 2%.   If you had to buy into this stock, significant gains in the month leading up to the event were seen in rallies during 2001, 2007 and 2008 that managed to sway the average return to a meager 0.55%, with a maximum average of around 12.5% if you cut it loose before the “month of love” even begins.

Jewelry Stores

Jewelry, what every woman hopes for when they receive that small box that ends up being filled with chocolates.   Are there significant sales on this special day that benefit the bottom line?   Initial inspection says “no”.

Tiffany & Co. (NYSE:TIF) did manage to advance in 57% of sessions following the day, but still averaged out a loss of 0.22%.   The “sparkle” fades even further when you open it up to the week following with only 35% of sessions advancing, and offering a loss of almost 3%.   The results leading up to the event were more or less even, with 50/50 returns over the respective periods.

Zale Corporation (NYSE:ZLC), another large player in the jewelry industry, kept pretty subdued numbers both before and after the day with less than 50% of sessions advancing and keeping gains off the books and out of the hearts of the women that expected a wonderful day.

Bottom Line

Everyone likes and expects chocolate to celebrate their Valentine’s Day, and the large players have been seen to benefit as a result.   If you’re looking at Hershey, the market tends to favor the period after the “love-filled” day, and Cadbury reveals the opposite, being favored the time leading up to the event.  

Jewelry Stores and Flower suppliers have shown more declines during this period than gains.   Chocolate and candy appears to be the wallet friendly alternative to these lavish items, and you’ll end up gaining much more than you’ll lose.

Stocks mentioned in this post: CBY, FLWS, HSY, RMCF, TIF, ZLC

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