Retail Holiday Sales: “Muddy”

A quick note on the start of the holiday shopping season. Three elements are apparent:

1) Data shows a (slightly) softer start to the season;

2) Discounting is everywhere;

3) Credit Card usage is up significantly.

This has not started out significantly better than last year. Indeed, according to ShopperTrak, sales for Black Friday actually fell 0.9 percent over last year, to $8.01 billion. At the same time, Visa reported that credit card use had surged 13.9 percent.

Was the drop due to increased discounting so early?  Or, do consumers simply have that much less cash in their pockets — due primarily to higher energy prices and reduced cash out refis? Perhaps a combination of facotrs explains this.

Of course, a single data point does not make a trend. There is still plenty of time for Retailers to recover, and this may end up a decent season. But so far, initial data is not exactly encouraging that we will see a robust shopping season.

The bottom line is early discounting, weaker shopping and increased reliance on credit cannot be spun positively. Perhaps my more recent optimism — still on the low side for most of Wall Street — was misplaced. My earlier expectations that the consumer is nearly shopped out seems to be very much coming to fruition.

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Sources:
Behind Early Shopping Frenzy: Big Deals, Worries About Season
ANN ZIMMERMAN, AMY MERRICK and ELLEN BYRON
THE WALL STREET JOURNAL, November 26, 2005; Page A1
http://online.wsj.com/article/SB113292430807906543.html

Initial Reports Are Mixed for Retail’s Busiest Day
MICHAEL BARBARO
NYT, November 27, 2005
http://www.nytimes.com/2005/11/27/national/27retail.html

What's been said:

Discussions found on the web:
  1. Emmanuel commented on Nov 27

    I’ve come across these figures too, and they seem to contrast with those of the National Retail Federation, which claims that sales are up some 22% from last year.

    Whom should we believe? I too will wait and see which figures hold up after a couple of days.

  2. internet shopper commented on Nov 27

    “according to ShopperTrak, sales for Black Friday actually fell 0.9 percent over last year, to $8.01 billion. At the same time, Visa reported that credit card use had surged 13.9 percent”

    A strong increase in online shopping would explain these seemingly contradictory data.

  3. Barry Ritholtz commented on Nov 27

    Emmanuel:

    Shoppertrack Referenced one day — Black Friday — while the National Retail Federation was referring to the entire holiday weekend.

  4. Chad K commented on Nov 28

    Another explaination is that transactions performed as “Credit” with a debit card, will count towards the stat. Technically it’s a visa. I’d be interested in knowing, from the major credit cards, whether or not the average increase in balance over the weekend was comparable to years past… since this will be a more true measure of overspending.

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