Don’t Believe the Hype: A Very Mixed Retail Picture

There are few things that make us more annoyed than bad data, lazy thinking or poor analysis. This weekend, the National Retail Federation hit for the inept cycle with their breathless reporting of holiday sales. The NRF erroneously trumpeted that the Thanksgiving weekend sales were “blockbuster,” having “surged 22% from a year ago to about $27.9 billion.” Further, they claimed 145 Million Shoppers hit stores and the web, up from 133 Million in ’04.

These are false and unsupported assumptions. The NRF report is an unsavory combination of recklessness and incompetence. Investors who rely on it as investment advice are sternly warned they do so at their own risk.

Here’s what we do know about NRF’s report: They conducted a survey on Black Friday and Saturday. They asked 4,209 consumers how much they were planning on spending. From this opinion survey, they extrapolated the total National spending of 145 million shoppers over both the long holiday weekend and the entire holiday shopping season – all without seeing any actual data whatsoever.

One cannot conclude what actual sales are based upon surveys of what people say they are going to do. At best, you can conclude what people’s spending plans are.

If I were their mathematics or statistics professor, I would give them a grade of “F,” strongly urging them to consider a less mathematically rigorous major (English, perhaps).

Here’s what data and actual observation reveals: ShopperTrac showed slightly softer sales on Black Friday, down less than 1% year over year. Note that this is based upon actual purchase data from 45,000 retailers, and not opinion polls.

Further, we note that retailers engaged in much more aggressive discounting when compared with last year’s holiday season. Third, according to Visa, Credit Card usage was up dramatically – about a 14% increase over the holiday weekend when compared with ’04. This implies that consumers are stretching to spend money they do not have.

To be blunt, I cannot tell which is more astonishing: that this inept group of PR flacks would report the data in such a patently misleading fashion, or that some of the Financial Press would get sucked in by the hyped data. CNBC breathlessly repeated, and even the usually reliable WSJ got it wrong, falsely declaring “First Holiday Shopping Weekend, Sets a Blistering Pace.” Um, no. At least the NYT was more circumspect, with a column titled: Mall Stores See Trouble in Sales Data.

I am left with the unfortunate conclusion that innumeracy – the mathematical equivalent of illiteracy – is a growing problem in the US. It clearly is so at the NRF.


UPDATE November 28, 2005  1:58 pm

Here’s the actual data from the NFR:
Download NRF_Black_Friday_2005_Results.xls


UPDATE November 30, 2005  5:28 am

WSJ Numbers Guy takes a swipe at the NRF data
Shorter URL:


UPDATE December 1, 2005  10:28 am

Jeff Macke of Macke Asset Management published on Minyanville the following roundup of same store sales performance in November; There aint a whole lot of firms reproting gains north of 22%:

Download Macke’s Retail Roundup.xls


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What's been said:

Discussions found on the web:
  1. royce commented on Nov 28

    I bet the NRF knew exactly what it was doing. It’s the news outlets that should be doing what you did here and ask how the data was collected before breathlessly reporting booming sales. But let’s face it, most of the financial press wants to report good economic news.

  2. David Silb commented on Nov 28

    Well as a former adjunct Economics professor I would say you are right in suggesting a different major, perhaps Marketing and or Law. Both involve expressing opinions that often have no facts in them what so ever.

    After the Thanksgiving holiday and listening to the numerous conversations in the various homes to which I visited. My own personal poll demostrated a real nerousness about the economic outlook for the new year. (Warning this poll is based on little if no scientific data or models what-so-ever, so don’t lump me in with the National Retail Federation and their data collection practices.)

    I think its unprofeesional and wreckless to shamelessly try to lead people into believing the holiday spending is more robust than it truly might be.

    For Shame For Shame.

  3. rob commented on Nov 28

    my friends in seattle retail said biz is off the charts

  4. Bruce Sherman commented on Nov 28

    >>”Third, according to Visa, Credit Card usage was up dramatically – about a 14% increase over the holiday weekend when compared with ’04. This implies that consumers are stretching to spend money they do not have. ”

    Those credit card bills will start arriving in the mail in late December and into January. Making matters worse, the credit card issuers are now required by the govt to increase the minimum monthly payments, starting with the December bills–and most consumers are unaware of this. Coupled with rising short term interest rates, many people will be hit with high monthly credit card payments at the same time they are dealing with higher home heating costs.

    Not good for 2006.

    Bruce Sherman
    Oakland, Oregon

  5. JWC commented on Nov 28

    Barry, I’ve still not seen much in the financial press about what Bruce just mentioned regarding the “change” in minimum payments for credit cards in January. Looks to me like the first of the year is going to bring the situation of a “perfect storm” for consumers between heating costs, credit cards, adjustments in HELOC’s….

    And this morning on CNBC I heard the bull guy talk about how wonderful next year will be!

    When my husband took an advanced economics for his MBA years ago he said the professor told them you could simplify economic theory in one sentence… “There is no such thing as a free lunch”.

    My common sense tells me sooner or later there will be a day of reckoning… the question is when, not whether. IMHO

  6. rob commented on Nov 28

    think a lot of people have switched from checks to credit cards and pay the balance every month. Alaska Airlines Visa piles up a lot of miles.

  7. B commented on Nov 28

    As an engineer by training that has spent much of my career in marketing, I can say this type of ridiculous logic is the norm. A major purveyor of this type of logic is the NYT and most major media outlets.

    It’s not a wonder the American public is so cynical of the pablum we are fed.

    God help us if we don’t lift the restrictions on H1-B Visas (Which are now being held up for “Homeland Security” reasons. huh?) for international engineers, scientists and students who WANT to come to America and create wealth because our k-12 educational system is laughable.

  8. critical thought commented on Nov 28

    “Third, according to Visa, Credit Card usage was up dramatically – about a 14% increase over the holiday weekend when compared with ’04. This implies that consumers are stretching to spend money they do not have.”

    wow. . . talk about bad reporting!

    an increase in CC usage over the weekend suddenly implies that consumers are stretching to spend money? holy mother of confirming bearish bias!

    aren’t online sales increasing wouldn’t that increase the use of Credit cards overall. . . .

    and according to the article you cite, shoptrack does not track as many electronics purchases – which we know is a big category this year (after years of slumping).

    its a whale of an assumption (with no data) to say that the increase in CC usage is because consumers are stretched. . . there are numerous data points that say otherwise. . .

    your bear is showing. . .

  9. howard commented on Nov 28

    critical thought, i too wondered about whether online sales were driving up the credit card usage, but really: what are these numerous data points that say that consumers aren’t overstretched? we long to see them….

  10. Emmanuel commented on Nov 28

    Thanks for clearing this up. To be fair, even The Financial Times here in England reported the same baloney. It’s suprising that both the WSJ and FT didn’t bother to check out the NRF’s bogus methodology. As for CNBC, well…[snort]

    At best, the NRF should have said that consumers had purchase intentions that were so-and-so above last year’s. From what I know of marketing research, this sort of misrepresentation is unforgivable, and would not pass muster at all.

    NRF flacks and flunkies, pay attention:
    Purchase intention ≠ purchasing behavior

  11. muckdog commented on Nov 28

    “Further, we note that retailers engaged in much more aggressive discounting when compared with last year’s holiday season. ”

    Those who were claiming inflation was all over the place would be astonished to hear this. These folks think that rising energy prices are inflationary. Looks like exactly the opposite, eh?

  12. howard commented on Nov 28

    muckdog, you do know the old saw about i’m losing money on each sale but i’ll make it up on volume?

    that retailers may be (and i emphasize the “may”) sufficiently desperate for customers that they are slashing prices already in the christmas season doesn’t tell us anything about inflation until we see whether said retailers make any frickin’ money on their sales.

    i work in the professional services field, and as i’m always telling people, i want clients to like us, but not to the point where i’m bribing them to like us. if prices needed to be 3% higher to allow for a profit margin….

  13. nate commented on Nov 28

    i saw the video coverage of the early morning shopping. i do not buy into the notion of “Scarcity” and “get it while you can” that retailers tried to create.

  14. nate commented on Nov 28

    i went shopping at Aldi’s today. I would encourage you to try it sometime, and compare the cost of a box of cereal: Aldi private label vs. brand in regular store.

  15. nate commented on Nov 28

    one mroe: there may be an increased chance of lots of bargain opportunities in january… even more than normal.

  16. cm commented on Nov 29

    Given today’s ubiquity of “dividend” (bonus percentage cashback/miles) cards, I wouldn’t make too much of increased card use.

  17. cm commented on Nov 29

    muckdog: Nobody has ever seriously claimed that inflation originates from the discretionary gadgets that stores want to peddle to customers. People are not predominantly making each other gifts of everyday food, cans of gasoline, or medical services vouchers.

  18. dsquared commented on Nov 29

    the gap between “purchase intentions” and actual spending is a good point but I would leave out the implied criticism of the sample size; 4,000 people seems like a perfectly decent sample size if it was even moderately well-designed.

  19. The Big Picture commented on Nov 29

    Mixed Retail Picture: Visa Edition4

    You folks posted alot of good comments yesterday following the discussion on increased Credit Card usage in the mixed retail post. Enough issues were raised that I tracked down some people at Visa to get a breakdown of the specific data regarding card …

  20. Barry Ritholtz commented on Nov 29

    An opinion poll of 4000 is a big good number — if you are trying to determine opinion.

    I would say that a sample size of 300 million would be just as wrong if you are trying to determine actual retail sales.

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