Retail follow up

Prior to Thanksgiving, I made my holiday shopping forecast

"I am looking for a gain in
holiday sales (year over year) that are 2.5 – 3.5% over 2005. This is
comparable (only slightly softer) than last year’s holiday gains. Last
year, our forecast was for 3-4%, and the final number was 3.5%."

While these numbers may be revised further, the initial tally is now in:  Holiday sales increased 3%, dead center of our range. Not only is this a decrease from 2005, but note that it is reported in nominal (pre-inflation) terms. With inflation about 3%, this means that Real sales (after-inflation) were flat year over year.

Here’s the recent headlines:

WSJ: A Luckluster Last Weekend

NYT: Rush  at End, but Sales Fall Short

Bloomberg:  U.S. Holiday Sales Increase 3%, Less Than in 2005

NBC:
Weekend  Sales Fall Below Projections;

Business Week: Retail  Results Signal Tough Times Ahead

CNN: Last-minute  shopping surge comes up short;

AP:  Shoppers dash retailers’ hopes.

As we warned in Canary in a Coal Mine,
the consumer has begun to show clear signs of tiring. They are not
ready to roll over and stop shopping, but they will very likely be
reducing their consumption in the near future.

Seasons greetings . . .

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What's been said:

Discussions found on the web:
  1. theroxylandr commented on Dec 27

    As inflation is also lower this year then previous I would say we got exactly same flat numbers as last year.

  2. lurker commented on Dec 27

    A tiring US consumer is actually an extremely important driver/catalyst to try to focus on as the implications for the global economy/China etc. are pretty crucial for 2007 and beyond. Thanks Barry!

  3. apw commented on Dec 27

    Is the “inflating” portion of the basket of goods really the part being measured by retail sales? While I certainly agree that inflation has been grossly under-reported for years now, electronic doo-dads, toys, clothes & other goods made in China don’t seem to be increasing in price at all.

    Unless people have started giving produce (apples on “sale” for $1.99!???), housing, health insurance, or tuition credits as Christmas gifts it seems like “flat year over year” is underestimating things a bit.

  4. Retail Sales commented on Dec 27

    You are using Mastercards retail sales as the right answer for the Holiday season ??

    3% because that fit your forecast ???

    but what about the unadjusted number of 6.6% ( sales , ex-sales ) …

    or the NRF’s 5% holiday sales number ….

    or Visa’s 6.5% holiday sales number…

    why not use those figures instead

  5. Barry Ritholtz commented on Dec 27

    Fair point — all of these numbers have their problems — but MC is the best of the lot. The NRF are survey based, Shopper trac is an extrapolation from traffic, Visa is total credit card usage. MasterCard Advisors measures purchases made by cash, checks and MasterCards, and thats why its the best of the PR type releases.

    But you raise a legit point, and I don’t want to be accused of cherry picking data. My point was that retail sales came in below expectations — Holiday sales growth about half of last years gains – and that is a significant drop off.

    As we noted yesterday: ” In the coming weeks, we will find out just how mediocre the retail shopping season has been, as well as the hows and the whys it happened.”

    We’ll get the final numbers in a few weeks . . .

  6. Bruce Neidlinger commented on Dec 27

    Why use the reported CPI number for inflation in the analysis? It is obviously a load of junk. The “real” inflation number is estimated to be in the 5-8% range depending on who you talk to and the definition of inflation used so that means virually any of those numbers are negative in real terms.

    The low and middle income consumers are tapped out. Only the upper end has money to spend now.

  7. me commented on Dec 27

    I forget which one but Mastercard or one of the surveys includes food purchased out.

  8. Tom commented on Dec 28

    Barry – I think the Big Picture view of retail sales is this: earlier in the year people were saying computer sales will slow and be put on hold pending Vista’s release. If that is what is depressing stock prices of Dell, Intel, etc., why shouldn’t we see sales take off in late January/early Feb? I read a magazine article that said for every dollar going to Vista, 12 dollars will be generated in related purchases (memory, software, etc.)

    I think the footnote to this data you are reviewing is the building of reserves as everyone is anticipating the purchase of a new computer next year and that it wil be more expensive to upgrade than ever (you really need a new machine to handle the new OS requirements).

    OK, not everyone is saving their money to buy a new computer but I am, and so are many others.

  9. Andy@TheKravman.com commented on Jan 3

    U.S. Retailers’ Sales in December Likely Rose 2.5%
    By Cotten Timberlake
    http://www.bloomberg.com/apps/news?pid=20601087&sid=atLoHLL_nYf8&refer=home

    Jan. 3 (Bloomberg) — Sales at U.S. retailers may have increased 2.5 percent in December, resulting in the slowest holiday season in two years, after warm weather, falling home prices and rising energy costs discouraged shoppers.

    The International Council of Shopping Centers, which will issue its final December figure tomorrow, expected sales at stores open at least a year for the five weeks through Dec. 30 to increase at the low end of 2.5 percent to 3.5 percent. Sales in the final week gained 2.8 from a year earlier, ICSC and UBS Securities LLC said today in a statement.

    Warm weather hurt outerwear purchases, while lower flat- screen television prices weighed on sales growth, analysts said. An acceleration in purchases the weekend before Christmas, and gift-card spending afterward, weren’t enough to compensate for a lull earlier in the month. Retailers will also issue their monthly sales reports tomorrow.

    “With the final tally on Thursday, results could fall slightly below consensus, particularly for some weather- sensitive chains,” UBS analyst Michelle Tan wrote in a report today.

    Sales for November and December combined likely rose 2.5 percent, ICSC, the New York-based trade group that tracks as many as 75 chains, said today. It had forecast an increase at the low end of 2.5 percent to 3 percent and initially expected a 3 percent gain. In 2005, sales for the two months increased 3.6 percent, while December alone gained 3.5 percent.

    Johnson Redbook Index Retail sales gained 3.2 percent in the last week of December, and increased 2.8 percent for the month, Johnson Redbook Research said today in a statement. The company’s index measures sales at stores open at least a year at a sample of general merchandise retailers representing 9,000 stores.

    Shares of Wal-Mart Stores Inc., the world’s largest retailer, gained 96 cents, or 2.1 percent, to $47.14 as of 9:31 a.m. in New York Stock Exchange composite trading. It was the first trading session since the company said December sales at U.S. stores open at least a year rose 1.6 percent. It had forecast growth of 1 percent or less.
    Sales of Electronics U.S. sales of electronics during the holiday shopping season rose 6.5 percent, slowing from a year earlier, as retailers cut prices on flat-panel television sets, the NPD Group said yesterday.

    Last month was the warmest December in 10 years in the U.S., according to a Jan. 2 report from Planalytics Inc., a Wayne, Pennsylvania-based weather consulting firm. The average U.S. maximum temperature was 51 degrees Fahrenheit (10.6 degrees Centigrade), up from 46 degrees in December 2005, it said.

    Stores accelerated price cuts on coats and jackets in an effort to generate more sales, although at a likely cost to profit, analysts said.

    “With ground to make up, overall promotions continue to tick up,” Dana Cohen, an analyst with Banc of America in New York, wrote in a report yesterday.
    Cold-weather merchandise at department stores and apparel chains sold for an average of 50 percent off, with some reductions up to 75 percent, Michelle Clark, an analyst with Morgan Stanley in New York, wrote Dec. 29. Such markdowns could hurt retailers’ profit for the quarter ending in January, she wrote.
    Sales, boosted by bargains, started out strong Black Friday, the day after Thanksgiving, slowed the following three weeks, and then rebounded in the past two weeks.

    “It was an OK season, it wasn’t that great,” Eric Beder, an analyst at Brean Murray Carret & Co. in New York, said in an interview Dec. 29, citing the weather and lower electronics prices.

    Target Minneapolis-based Target Corp., the second-largest discounter, said Dec. 18 that December sales at stores open at least a year would be within its forecast for a gain of 3.5 percent to 5.5 percent. Target shares gained 65 cents to $57.70 today.
    The Internet was a bright spot during a Christmas season that the ICSC says was the slowest since 2004. Online sales for the 56 days ended Dec. 26 rose 26 percent to $23.1 billion, Reston, Virginia-based ComScore Networks Inc. said last week.

    Consumers are feeling less wealthy as home prices have stumbled. Prices in 20 U.S. metropolitan areas fell in October for a third month, according to a private survey released Dec. 26. Home values dropped 0.2 percent during the month, according to the S&P/Case-Shiller home-price index.
    Average U.S. gasoline prices at the pump rose to $2.34 a gallon in the week ended Dec. 25, from $2.20 on Nov. 6.

    About 32 percent of the retail industry’s profit and 27 percent of sales were derived during the final quarter of 2005, according to the ICSC.

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