Retail Sales = Hard Landing ?

How bad were April Retail Sales today?

• Wal-Mart posted its deepest monthly decline in at least 28 years.

• The UBS-International Council of Shopping Centers sales tally posted a decline of 2.3 percent, the biggest drop since the index started tracking the data.

• 80% of retailers that have reported missed comp estimates, according to Peter Bookvar of Miller Tabak

• When the Retailers made their forecasts for April sales, they already knew that Easter was in March. Despite making adjustments for that calendar variation, they STILL MISSED ESTIMATES BY A WIDE MARK.

Blame it on the Weather:  A quick reminder of the Retailers favorite bullshit excuses: The Weather. In April, there was too much rain. (You mean it rains in the Spring — Who Knew ???)

To remind y’all about some past exusage, it was "Too warm in January, too cold in February, too much static cling in March. The fear for May is the emergence of the 17 year Cicada, which will interfere dramatically with ongoing retail promotions. Also of major concern: German U-Boats off of the coast of New Jersey will be interfering with the Memorial Day sales. (We last looked at these less-than-believable excuses in Through The Retail Looking Glass)

I demand that if you are going to bullshit me with absurd and moronic excuses, at least have the god-damned courtesy to make them entertaining.

Is there anyone who covers Retail that can answer a question honestly? Yes:

"Aside from scheduling changes [early Easter], several economic factors likely hampered
Wal-Mart and other retailers. Consumers did most of their tax-refund
spending in March. Gasoline prices have risen 9% in the past month to
$3.03 a gallon, further pinching cash-strapped consumers. "Housing
market sluggishness has translated into much lower levels of mortgage
equity withdrawal in 2006 and 2007 from what we saw in 2005,"
Retail
Metrics President Ken Perkins said. Such withdrawals had been "a
significant source of consumer spending."

Retail Sales drop
click for larger interactive chart
>

Retail_sales_drop_mm

>

Sources:
Toyota Reports Modest Growth On Materials Costs, U.S. Slowness
AMY CHOZICK
WSJ, May 9, 2007 8:30 a.m.
http://online.wsj.com/article/SB117869114262197051.html

Wal-Mart Sales Are Worst in 28 Years
KRIS HUDSON
WSJ, May 10, 2007 11:42 a.m.
http://online.wsj.com/article/SB117880185064598518.html

U.S. Retailers’ April Sales Dip on Earlier Easter
Heather Burke
Bloomberg, May 10 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7L2Aoa5hAXg&

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What's been said:

Discussions found on the web:
  1. donna commented on May 10

    Saks is up 11% though!

    I think this recession will be caused by too much money in too few hands. The only ones who have done well in this business cycle are the very rich.

  2. tjofpa commented on May 10

    So, Barry, how did u REALLY feel about those excuses?

    OUCH…

  3. Richard commented on May 10

    it’s only one month barry. lets see what may and june look like. if they’re consistent with april then houston we have a problem.

  4. Winston Munn commented on May 10

    Concerning the argument that March was up so April is down therefore we have to average the two, it might be enlightening to remember that those who created the missed estimates in both months knew when they created them that Easter fell early.

  5. Richard commented on May 10

    >>In April, there was too much rain

    there is rationale behind this. you live in NY so you should know better. we got almost as much rain as hurricane floyd in less time. we had the 3 highest april rainfall on record in the tri-state area. bound brook, nj was practically under water for a couple of weeks. roads near me in northern nj were shut for over almost 2 weeks. getting around town was quite inconvenient, especially to route 10 shopping strip. half the people i know had flooded basements. you think they were out shopping?

    yes the weather did have an impact. how much is debatable but to shrug it off is disingenuous.

  6. Barry Ritholtz commented on May 10

    Its the same nonsense every month — too hot too cold too dry too wet.

    Month after month after month — Its crap.

    Let’s all agree: Weather fluctuates. When it rains, run promotions for slickers and umbrellas.

  7. Tom B commented on May 10

    Jos. Banks is up; that must mean people are looking for work and need suits….

  8. s0mebody commented on May 10

    Bob Pisani has been laying it out for everybody today on CNBC. Easter was early, so you need to average the two months. Then, you need to wait for May sales to see if a trend develops. If May sales are down, we may need to wait for June numbers to confirm the trend. If the numbers continue to be bad, don’t jump the gun just yet. The second half resurgence is just around the corner, so you might as well see how the fall turns out. If the fall continues to drag, Xmas is just around the corner for the recovery everyone has been waiting for. In my opinion, we should know whether retail is really slowing down sometime in 2009.

  9. Trent commented on May 10

    Barry,

    When making up entertaining bullshit excuses you should make them plausible. The cicadas last resurfaced in 2004 and aren’t due for another decade.

    And that April Showers thing is just a cliche. Like sell in May…

  10. S commented on May 10

    If I didn’t know the economy ex housing is fine, I might wonder if four consecutive months of weak retail sales might be suggestive of an emerging trend.

    But the economy, ex housing, is fine. So I’ll declare it a rare, black swan like unfortunate sequence of events and thank the stock gods for the rare dip.

    Or not.

  11. Richard commented on May 10

    you need may and june to get a more complete picture.

  12. Winston Munn commented on May 10

    Richard:

    I agree that one month does not establish a trend. I also believe the optomistic bias of this market is so immense it is going to take a serious wakening slap in the face to make it falter.

    The indicators I keep show me a divergence between the underlying stocks and the indices – and I ponder what catalyst might induce a major correction.

    It may be that all these individual releases like housing starts, retail sales, etc., may each be discounted in turn, but when a major indicator ties all the loose ends together and shows the composite of the economic landscape, that may well be the time we see the major correction start.

    The preliminary GDP ties all those loose ends together – the next release date may be an extremely important day.

  13. Fred commented on May 10

    Look ahead of you…not behind. Who DIDN’T see a slowdown coming?! Certainly no one that reads this blog!!

    NEW YORK, May 4 (Reuters) – A gauge of future U.S. economic growth rose last week to a three-month high, a research group said on Friday.

    The increase was due to higher stock prices, lower jobless claims and lower interest rates, the research group said.

    The Economic Cycle Research Institute, an independent forecasting group, said its Weekly Leading Index increased to 142.4 in the week ended April 27 from a revised 141.1 in the prior week.

    Its annualized growth rate rose to 4.4 percent, a three-month high, from a revised 3.6 percent the prior week.

    “With weekly leading index growth reviving to a three-month high, U.S. economic growth prospects are quite positive,” said Lakshman Achuthan, managing director at ECRI.

  14. KirkH commented on May 10

    “I demand that if you are going to bullshit me with absurd and moronic excuses, well at least have the god-damned courtesy to make them entertaining.”

    That is the best one sentence explanation of why newspapers are doomed that I’ve ever read.

  15. Greg Feirman commented on May 10

    I just wrote a post “Today’s Retail Numbers Don’t Mean Anything” over at my blog: http://www.topgunfp.com – I cited Barry’s post.

    The bottom line is that the most plausible explanation is that today’s retail numbers, as well as last month’s, are best explained by Easter conming 8 days early this year.

    I mean are we really supposed to think the consumer fell off the wagon in April (retail sales down 2.3%) but were fine in March (up 6%)???? If you look at this year’s March/April compared to the same period last year sales are up 1.8%. That’s the real number.

  16. rebound commented on May 10

    Barry,

    I tried to give you a heads up on this insanity this morning but you ranted quite well without my help:

    http://bigpicture.typepad.com/comments/2007/05/broken_fiber_li.html#comments

    What’s next? Data posted Ex-Weather? It seems people should just post unadjusted data, with the formulas, and call it good. Enough monkeying around.

    As far as waiting for confirmation next month … why should we? The number is the number. God help us if they upwardly revise … due to a new sun-spot hedonic adjustment or some new fangled wind chill/sales^skirt_length multiplier.

    Sorry to be so damned sarcastic.

  17. Fred commented on May 10

    Anirvan Banerji from ECRI just wrote a blurb on RealMoney.com titled, “Still a Goldilocks Economy”

    He mentions, “the fact that the seasonally adjusted median new home price is up more than 10% since September, while the median existing home price is up more than two and a quarter percent since January. In the context of the cyclical upturn in ECRI’s Leading Home Price Index, which correctly anticipated the home price downturn, I find the recent trajectory of median home prices worthy of note.

    Bottom line, despite pockets of weakness, recession risks remain remote, while inflation pressures are still in an easing trend.”

  18. mhm commented on May 10

    Goldman Sachs: “As speculation continues to be nurtured among domestic retail investors, we see genuine risks of market euphoria materializing if regulators fail to step up their efforts to contain market irregularities,” Deng said.

    No, not USA (yet), GS is talking about China…

    http://tinyurl.com/2lnj3o

  19. anon commented on May 10

    Can someone explain “Easter sales” and how the absence of them could have had an effect of this magnitude? Do people really do a lot more shopping around Easter?

  20. yc32 commented on May 10

    It smells like that maybe tomorrow’s PPI and retail sales data will be bad, and some big funds got a leak?

  21. Michael Donnelly commented on May 10

    I like Retail sales ex: weather. funny.

    Sure lots of spending is on energy. But just because these retailers aren’t doing well somebody is. Nominal PCE spending in the first quarter was up 7.2% that’s fantastic no matter how you slice it.

    Retail sales were up 0.5% in Feb (vehicles, gas, and nonstore retailers) and up 0.7% in March (Furniture, building material, gas, clothing up 2.4%, sporting goods, general merchandise)

    Does it collapse as consumers react to higher gas prices? Maybe, but they didn’t in 2005 and 2006, they just tipped into savings. BTW: Freddie Mac increased its estimate of MEW in a big way for the 1st quarter (May 1, 2007 press release) so maybe the party stays alive a little longer.

    Barry, you mind if I give a little shout out to help maintain GDP quality in the housing sector?

    http://pbp.typepad.com/economy/2007/05/please_sign_thi.html

    NAHB is asking for emails to help support its petition to keep funding in FY2008 for SORAR.

  22. shawn commented on May 10

    Strange that the weekly jobless claims have been trending down for more than 4 weeks already, while continueing claim keep creeping up.

    So, I guess weekly jobless claims no longer correlate to the retails sales as well as job creation?

    ——————————————

    U.S. weekly jobless claims lowest since January

    Initial unemployment claims decline for fourth consecutive week
    By Robert Schroeder, MarketWatch
    Last Update: 11:06 AM ET May 10, 2007

    WASHINGTON (MarketWatch) — In a sign of a tight labor market, U.S. weekly jobless claims fell to their lowest level since mid-January, the Labor Department reported Thursday.
    First time applications for state unemployment benefits fell by 9,000 to 297,000 in the week ending May 5, the department said, the lowest since Jan. 13.

  23. shawn commented on May 10

    Strange that the weekly jobless claims have been trending down for more than 4 weeks already, while continueing claim keep creeping up.

    So, I guess weekly jobless claims no longer correlate to the retails sales as well as job creation?

    ——————————————

    U.S. weekly jobless claims lowest since January

    Initial unemployment claims decline for fourth consecutive week
    By Robert Schroeder, MarketWatch
    Last Update: 11:06 AM ET May 10, 2007

    WASHINGTON (MarketWatch) — In a sign of a tight labor market, U.S. weekly jobless claims fell to their lowest level since mid-January, the Labor Department reported Thursday.
    First time applications for state unemployment benefits fell by 9,000 to 297,000 in the week ending May 5, the department said, the lowest since Jan. 13.

  24. Byno commented on May 10

    Just to recap, we now have:

    Inflation ex-inflation
    GDP ex-housing
    Retail Sales ex-weather

    Kinda like having sex ex-penetration.

  25. Sponge Todd Square Pants commented on May 10

    hey how novel.the stock market actually reacted rationally to some evidence that the US economy is weakening.

  26. Barry Ritholtz commented on May 10

    When the Retailers made their forecasts for April sales, they already knew that Easter was in March.

    Despite making adjustments for that, they STILL MISSED ESTIMATES BY A WIDE MARK.

    This isn’t brain surgery, people . . .

  27. Steve commented on May 10

    Strange that the weekly jobless claims have been trending down for more than 4 weeks already, while continueing claim keep creeping up.

    It’s not strange at all. What it means is that the pace of new hiring is slowing (which is why it takes the unemployed longer to find new work), but it also means that employers are keeping the employees they do have.

  28. dh commented on May 10

    Barry,
    Are you going to do a dollar-weighted analysis of the magnitude of the Missed expectations. For Example, A 1% decline in
    Walmart Sales more than offsets a 20% gain for, lets say, Saks?

  29. jack commented on May 10

    Can someone with good memory enlight me how 2007 is similar or dissimilar to 1990, especially housing wise?
    Thanks!

  30. Craig commented on May 10

    Here’s another clue.
    Here in the Northwest, when it’s raining or colder, Starbucks gets increased business.

    Were Starbucks comps up in April?

  31. Michael Donnelly commented on May 10

    The WSJ chart has a click thru to the prior month. Here is what they said in March.

    These realizing Easter was in March.

    Ann Taylor
    ” Results were helped by the warm weather in the beginning of the month and benefited somewhat by the earlier timing of Easter this year. ”

    JC Penney
    “Strength in apparel, which benefited from early Easter ”
    Actual -4.7% and around the corner? “May sales are expected to be flat.”

    Wal-Mart
    “Strong sales in Easter merchandise … Cautioned may miss quarterly earnings target.”
    Actual -3.5% and they dragged easter out again! “and an earlier Easter weighed on results”

    Some companies didn’t catch it, in April

    GAP -16% “(blamed) the shift in the Easter holiday for the deterioration in results”

    Claire’s stores -6% and American Eagle -10%, “Cites Easter shift” and “blamed the Easter shift”

    These firms deserve kudos

    Nordstrom
    “April expected to be weak”
    Actual +3%

    Target
    “Estimates a loss of 2% to 4% for April.”
    Actual -6.1%

    Limited
    “Expects low-single digit percentage increase in April same-store sales.”
    Actual -1%

  32. M.Z. Forrest commented on May 10

    Has retail ever performed well when Queen Elizabeth travels to the Kentucky Derby?

    Has retail ever preformed well when there has been a white tie dinner at the White House?

    Has retail ever performed well when the Milwaukee Brewers have the best record in baseball?

    Until we get more data on these questions, a prudent man better be careful saying this is the economy’s fault. There is no reason to rashly go off and accept the easy explanations when the outrageous ones will suffice.

  33. John commented on May 10

    Let’s just call it all economic data ex-disappointments.

    Evidently, Goldilocks is an ostrich…

  34. Momo Fader commented on May 10

    No wonder the ECRI is so blithely confident about the economy. They’re using the stock market in their models. They’re accepting those job numbers without questioning birth/death adjustments? I think they’re going to miss the next (current?) recession, and their model is going to lose a fair bit of its legitimacy.

  35. me commented on May 10

    “Strange that the weekly jobless claims have been trending down for more than 4 weeks already, while continuing claim keep creeping up.”

    And here is my problem. How many people are eligible for unemployment anymore. There are way fewer people “participating” in the labor market.
    Part-time, not eligible. Contractors, not eligible, self employed, not eligible. Temps, not eligible.

    With claims falling I just wonder if as many can claim benefits as say 10 years ago.

    If IBM fires 50,000 in the last 5 years (they did), and then hires a few back as contractors, and then fires those contractors, they are entitled to nothing. Does this have am impact?

  36. ferd mertz commented on May 10

    interesting that ECRI has been so optimistic. paul kasriel at northerntrust.com has a variety of economic indicators that are far less bullish with evidently decent past results comparable to ECRI. i wonder if model weights giving more credence to financial market indicators influence ECRI. the financial sphere wags the economy’s tail. when financial markets finally recognize what the economic numbers have been saying, the economy will turn down decisively.

  37. ferd mertz commented on May 10

    interesting that ECRI has been so optimistic. paul kasriel at northerntrust.com has a variety of economic indicators that are far less bullish with evidently decent past results comparable to ECRI. i wonder if model weights giving more credence to financial market indicators influence ECRI. the financial sphere wags the economy’s tail. when financial markets finally recognize what the economic numbers have been saying, the economy will turn down decisively.

  38. rs commented on May 10

    Really, where I live, the weather was so nice in April that no one wanted to waste their time inside a mall! That’s probably why sales were down a bit.

  39. Winston Munn commented on May 10

    The reason for the explosion of blogs such as this is due to the highly questionable reliability of mass of data that is being reported.

    For those who rely on these numbers for forecast models I have only one point to make: GIGO.

  40. wally commented on May 10

    As WalMart goes, so goes China.

  41. Winston Munn commented on May 10

    I mean, who are you going to belive, me or your damn lying eyes!

    Quote: “Nouriel Roubini | May 10, 2007 Based on a variety of data that have come out after the first estimate of Q1 US growth at 1.3% it is now likely that US growth in Q1 was actually below 1% (probably close to 0.7%); we are thus already into a “growth recession” territory. ”

    Or we can compare March via Richard Daughty, “Liscio reports that ‘In March only 18% of the states in our survey hit or exceeded their estimated sales tax collections, and levels in just over 30% of the states were lower than they were in March 2006, some quite steeply so.'”

    And this again from Richard Daughty: “Tony Cherniawski of thepracticalinvestor.com reflects, ‘To make matters worse, the report shows that the Civilian Labor force declined by 468,000. Really? Where did they go? Forgive my conclusion, but it looks like we may have lost as many as 697,000 jobs last month.'”

    Today’s Permabull mantra: It’s not recession – it’s the weather.

  42. Frankie commented on May 10

    It’s a slowdown for gawds sake.

  43. Scott commented on May 11

    The International Council of Shopping Centers tallied an overall same-store sales drop of 2.3% to set the largest decline on record, which dates back to November 1970. For the combined March-April period, same-store sales were up an anemic 1.8%, below the 2.8% expectation.

    “It’s an ugly picture,” said Michael Niemira, ICSC’s chief economist. “The 2.3% decline is a wake-up call that something fundamental is going on.”

  44. ECONOMISTA NON GRATA commented on May 11

    So begins PHASE II of the housing resesion…. FINALLY…!

    One month does not a trend begin, but these numbers are a trend on to themselves.

    Danger lurks on the horizon, can we make it through another weekend boys and girls….?

    Best Reegrds,

    Econolicious

  45. SPECTRE of Deflation commented on May 11

    Additional Reporting:

    DOWNS

    Abercrombie -15%
    American Eagle -10%
    Banana Republic’s -13%
    Bebe -6.5%
    Chicos -7.3%
    Claire’s Stores -6%
    Federated (Macy’s & Bloomy’s) -2.2%
    Gap -16% Gottschalks -5.1%
    JC Penney -4.7%
    Kohl’s -10.5%
    Kirkland’s -18.8%
    Limited -1%
    Old Navy -20%
    Sharper Image -11%
    Target -6.1%
    Wal Mart Stores -3.5%

    UPS

    Costco up +7%
    Nordstrom +3.1%
    Saks +12%
    Zumiez +3%

    WARNINGS ISSUED
    Children’s Place
    Pacific Sunwear
    New York & Co

    Costco and Saks up. Strange bedfellows indeed.

  46. Tom commented on May 14

    From the USNO dates of Easter, by Year:
    1980 April 6 1995 April 16 2010 April 4

    1981 April 19 1996 April 7 2011 April 24

    1982 April 11 1997 March 30 2012 April 8

    1983 April 3 1998 April 12 2013 March 31

    1984 April 22 1999 April 4 2014 April 20

    1985 April 7 2000 April 23 2015 April 5

    1986 March 30 2001 April 15 2016 March 27

    1987 April 19 2002 March 31 2017 April 16

    1988 April 3 2003 April 20 2018 April 1

    1989 March 26 2004 April 11 2019 April 21

    1990 April 15 2005 March 27 2020 April 12

    1991 March 31 2006 April 16 2021 April 4

    1992 April 19 2007 April 8 2022 April 17

    1993 April 11 2008 March 23 2023 April 9

    1994 April 3 2009 April 12 2024 March 31

    Going through these dates, you can see that there is ONE more occurrence of Easter AFTER this year’s date of April 8, than there is BEFORE April 8. This, over a 44-year period, makes April 8 the Median Easter Date, in my eyes. That can in no way make Easter, this year, “early.”