Economic Research and Retail Shopping

Mrs. Big Picture is smart enough to know that when she wants to go
shopping, she best not call it that if she wants me to come along. So
the clever lass has taken to calling sport shopping "Economic Research."

I do this sort of "research" every week.

That’s why I laughed on Tuesday night, when Noah Blackstein busted my chops for shopping at Sears (I’ve been a Land’s End client for years). While I was there, I looked at appliances, lawn mowers, plasmas, and Levis. On a Saturday afternoon, tumbleweeds rolled by — the store was totally empty.

I have the same routine every time I visit a store: I look at the merchandise, see how well the store is stocked, merchandised, organized, cleaned, etc. Typical Peter Lynch stuff. I lurk around, watching other customers interact with store employees. I often buy something, if only to return it and see how the process is. (A pair of Levis went back to Sears 3X — they were defective and split in the wash).

Over the past month, I have been to the following stores:

Public
Target (TGT)
Home Depot (HD)
Lowes (LOW)
Best Buy (BBY)
Circuit City (CC)
Ralph Lauren Polo (RL)
Macys (M)
Apple (AAPL)
BJs (BJ)
Nordstrom (JWN)
Starbucks (SBUX)
Smith & Wollensky (SWRG)
Saks Fifth Avenue (SKS)
Pottery Barn (WSM)
Coach (COH)
Williams Sonoma (WSM)
Gap (GPS)
Sears (SHLD)
Blockbuster (BBI)

Online
Netflix (NFLX)
Amazon (AMZN)
EBay (EBAY)

Private:
Fortunoffs
Lord & Taylor
Century 21
Barneys (formerly BNNY)

Autos
Toyota
Acura
Chrysler
Nissan
BMW

That doesn’t count all the small mom and pop stores and restaurants.

Over that period, I purchased items at Home Depot and Lowes (all sorts of stuff), Fortunoffs, Target, Polo, Century 21 (my Ted Baker ties come from there as well as Saks and Ebay), Lord & Taylor, Amazon (books and DVDs/CDs), and an auto dealer (I used Swapalease.com to replace the wifes RX8). Oh, and I got a new keyboard at Apple.

I avoid Wal-Mart (WMT) in NY, as the stores are these horrific garish fluorescent nightmares. In California, where they seem to be open til midnight or even 24 hours, I have made emergency/lost luggage purchases at the only slightly less ugly versions. I cannot recall the last time I was in a K-Mart (SHLD), but many years ago they wrere the only big box retailer in the Hamptons/Riverhead.

~~~

Sandy in comments asks: Aside from Sears, how does everything else look?

UPDATE: July 12, 2007 2:45pm

Sandy in comments asks: Aside from Sears, how does everything else look?

-Home Depot is mediocre, service is poor, sales staff hard to find — but there are signs of improvement;

-Lowes is much better — but not so much better that HD couldn’t catch up quickly;

-The Apple store is a pleasure, except its usually so busy there is a crush at the Genius Bar, their tech support  (recall the dead iPod issue). I’ve gone at off hours, and its been fine.

-The Gap is usually a mess, but the Gap Outlet Center was totally jammed.

-Fortunoff’s and Lord & Taylor are both terrific. anyone who doubts inflation hasn’t stepped into a Coach recently.

-Nordstrom is sometimes wonderful and and sometimes haughty.

-Century
21 is the best Department store you will ever step foot into if you are
remotely price sensitive. I am too much of a slob to pay $125 for a
tie, but I am happy to spill soup on $30 ties all week long.

-Ralph
Lauren has wonderful (if pricey) clothes; My wife the colorist (she
teaches fashion illustration and design) says no one does colors better
than him;

-All the car dealers were kinda pathetic — they
were hungry for sales, and I met some very nice car salesman, but none
of whom had much room on prices.(Hence, swapalease). I could spend
hours critiquing the various car designs, but thats another blog
entirely;

BTW, first time I ever mentioned Smith & Wollensky
at the blog — and the first time they ever over cook my rare/med-rare
steak.

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What's been said:

Discussions found on the web:
  1. Sandy commented on Jul 12

    So, you’ve done all this research, don’t leave us hanging. Aside from Sears, how does everything else look?

  2. econ101 commented on Jul 12

    July 12 (Bloomberg) — U.S. stocks rallied, sending the Dow Jones Industrial Average to a record, after retailers reported better-than-expected sales and investors speculated Alcoa Inc. may be bought.

    Wal-Mart Stores Inc., the world’s largest retailer, posted its biggest gain in a month after same-store sales tripled analysts’ predictions. Aluminum producer Alcoa led the Dow’s advance as Rio Tinto Group’s plan to buy Alcan Inc. spurred expectations of more takeovers in the metals industry

    is this market blowing off here?

  3. dblwyo commented on Jul 12

    Very good – and your general reactions & conclusions would be ? From the market reaction you’d think the 2nd coming was here. If you read a bit beneath the headlines from today’s WSJ article things are pretty lackluster:
    Retailers Post Modest Gains,
    But Department Stores Are Weak
    By JAMES COVERT
    July 12, 2007 1:29 p.m.

    NEW YORK — Retailers rang up modest sales gains for June, confirming that shoppers are hunting for bargains amid a weak housing market that’s expected to persist in the coming months.
    ….
    For June, retailers reported a 2.4% increase in sales at stores open at least a year — or same-store sales, a closely watched measure of industry performance — according to an index of 50 major chains compiled by the International Council of Shopping Centers.
    That’s at the high end of the New York trade group’s forecast, and comes despite a calendar quirk that shifted some Memorial Day-related sales into May this year. Still, it’s short of the year-ago 3% gain, said Chief Economist Michael Niemira. The results confirm a collective pace this year that’s stuck in the 2% to 2.5% range — well below the 3.6% increase logged for all of 2006, he says.
    ….
    Wal-Mart, Bentonville, Ark., posted a 2.4% increase, topping its forecast for sales to be flat to up 2%. The company’s namesake stores reported a 1.6% gain, while Sam’s Club posted a 6.9% jump excluding fuel sales. Wal-Mart touted strong sales of flat-screen TVs and computers, boosted by remodeled electronics departments and improved products including a new, exclusive computer line from Dell Inc.
    Still, Wal-Mart admitted sales of apparel and home-related goods were weak, and that its grocery aisles continue to be the busiest. In a written statement, Wal-Mart said gasoline prices have become its shoppers’ “chief concern.” But brisk food sales are an indication that shoppers are feeling the pinch of higher prices for meat, bread and milk, and flocking to Wal-Mart and Sam’s Clubs for bargains, says Britt Beemer, president of America’s Research Group, Charleston, S.C.
    Wal-Mart expects its July same-store sales to rise 1% to 2% and backed its forecast for second-quarter earnings of 75 cents to 79 cents a share.

    That doesn’t sound like a strong economy to moi.

  4. DD commented on Jul 12

    WTF dude!?! You gotta say “sorry baby…I’m busy reading…”

    or lifting weights…

  5. bjk commented on Jul 12

    Buying stuff for the purpose of returning it. People who do that should be pubicly shamed.

    ~~~

    BR: Why?

  6. bjk commented on Jul 12

    You’re taking advantage of the retailers permissive policies. The retailer loses money on the two transactions. All so you can play at amateur sleuth.

    ~~~

    BR: We run well over 100 million dollars in client assets, plus institutional clients. If I choose to buy and return an item at key retail stores (including retailers that we may be long or short in) as part of my “amateur sleuthing,” that’s my prerogative.

    If Home Depot, or Best Buy or Target or BJs wants to DK my business, thats there option . . .

  7. Catalyst Investor commented on Jul 12

    If taking a pair of jeans back to a retailer is going to break the bank, they have bigger problems. Those problems usually come to light when they start a restrictive policy on returns.

    When I invest money, I know quite well how the customer experience is compared to alternatives.

  8. Sven commented on Jul 12

    Seriously…I’d like some veteran “seen it all” maarket maven to tell me where this rally is coming from–the news just wasn’t/hasn’t been that good.

    Is this a lot of people thinking they’ll be missing the boat if they don’t jump on here?

  9. TECHY2468 commented on Jul 12

    housing may not hurt economy so bad…..if the slump gets financed by taxpayers money (borrowed from future)
    ————-
    http://www.minyanville.com/articles/index.php?a=13331
    ———–
    3. Hey Everyone, We Just Bought 1,000 More Houses!

    The Massachusetts Housing Finance Agency, using funds from Fannie Mae (FNM), is establishing a $250 million program to refinance the mortgages of people facing foreclosure, according to Bloomberg.

    To qualify, homeowners must show they were put into “unaffordable and unsustainable” subprime mortgages, “where abusive practices may have been used by the lender,” according to Bloomberg.
    About 1,000 people are expected to qualify for the program, officials said.
    The Massachusetts Housing Finance Agency will sell $60 million in bonds to fund the program, and Fannie Mae, the largest provider of money for U.S. home loans, will contribute $190 million.
    New York and New Jersey are among the states considering establishing similar bond programs to aid homeowners facing foreclosure.
    Meanwhile, the Ohio Housing Finance Agency began making refinancing available to at-risk homeowners in April with financing coming from $100 million in bonds.
    In other words, Congratulations taxpayers on successfully closing on $160 million (so far) in new homes.

  10. S commented on Jul 12

    Wow…you visited more stores in a month than I will visit in a year. Now we know why the retailers put up good numbers in June.

  11. Eclectic commented on Jul 12

    “Mrs. Big Picture is smart enough to know that when she wants to go shopping, she best not call it that if she wants me to come along.” per BR

    …Yeah, like my ass. All she’d have to do is hint… merely HiNt! that she was off for shopping and you’d be in the car… panting!… wantin’ to know “just where do we start!”

    You know, Barringo, I probably know you about as well as anybody, and I don’t even know you!

    You motor trucker!

  12. Matt M. commented on Jul 12

    BR,

    Has the shopping spree resulted in any profitable trades?

    ~~~

    BR: Over the years, lots — both Long and Short: AAPL, TGT, WFMI, HD, LOW, DELL, SPUN, ANF, EBAY.

  13. Tom B commented on Jul 12

    To bash Peter Lynch-ism just a bit: Walmart is a very large, successful business, in spite of the awful store experience. Having said that, I prefer to shop– and to invest– in companies that present a good face to the user.
    ~~~

    BR: Exactly what the link referenced discusses:
    http://bigpicture.typepad.com/comments/2003/12/are_the_etailer.html

  14. Elizabeth Simmer commented on Jul 12

    Personally, I don’t see a problem with buying something you intend to return. You as an investor or potential investor want to know how that company is going to handle the customer throughout the cycle.

    I just marvel that you find the time to do this.

  15. ac commented on Jul 12

    Wal-Marts earnings weren’t ‘impressive’ at all and don’t mean a thing for consumption because they don’t necessarily mean the truth as in November.

    Nice selloff to come when the market is bullied up like January.

  16. Pool Shark commented on Jul 12

    Got to agree with bjk…

    I don’t think anyone has a problem with consumers returning defective/deficient products.

    But those who think it’s just fine to purchase a product already knowing they will return it (or those who simply change their mind after the purchase) are simply taking money out of other shopper’s pockets.

    btw, I’m sure there are many who would like to return their BX shares…

    I would personally like to see retailers establish a new policy of offering an additional discount (even if it were as little as 2-3%) to shoppers who agree to a ‘no-return’ policy (absent truly defective merchandise of course).

    If you’re not certain you want the damned thing; don’t BUY the damned thing!

    (That’s why they have fitting rooms at clothing stores)

  17. Jamie.BuchersGhost commented on Jul 12

    BR,

    I had the exact opposite trip to HD and LOW the other day. I went to LOW (closer store of the two to my house) hoping i could get everything i needed in one trip. Parking lot was pretty empty and didn’t see many customers and yet even wandering around looking I couldn’t find anyone to help me. In turn i only bought some of my stuff from there. When i get to the counter there was 4 people waiting to buy stuff and only one register open.

    The HD is 2 miles down the road, I go looking for my final items. Place was packed to the gills. Customers everywhere and workers helping/asking if i need help. I get everything i need and HD has SELF CHECKOUTS!!! No waiting in line, it was perfect. For that reason only I’ve gone back to HD few more times and skipped the closer Lowe’s.

    Maybe it’s just me, but :
    A) i get aggravated waiting in line behind guys with tons of stuff when i only have a few things
    B) I feel bad taking up spots in line for a cashier and wasting construction workers time who are behind me, when IF self checkout was an option i’d go for it.

    Both of these stores have been in business for 2 years plus, and sales weren’t crazy.

    Just my 2 cents.

  18. muckdog commented on Jul 12

    Remember, the retail numbers beat a lowered target. Folks were thinking that the consumer was in trouble, and retail estimates were lowered. The earnings coming in are beating the lowered estimates.

    Still overall good. Consumers appear to be fine. The jobs numbers are good. Today’s initial jobless claims fell, showing that the labor market is tight.

    The subprime worries are valid, but maybe it won’t matter much unless we see the unemployment situation degrade. We’re nowhere near that now.

  19. VennData commented on Jul 12

    I stopped into the Sears in the Loop (Chicago) and it was empty. I was down there a few days later it was empty except for some contractor making some pointless improvements. I went home and sold it all and took it off Stockpikr.com.

    After what happened over the last month I’d say Lynchian research works.

    Question: how do I do this with GS?

  20. ac commented on Jul 12

    sorry dude, I am going to rip up your logic:

    Remember, the retail numbers beat a lowered target. Folks were thinking that the consumer was in trouble, and retail estimates were lowered. The earnings coming in are beating the lowered estimates.

    BS. Retailers can spin what they want. PCE is where it is at and that is all that counts. Consumer is in trouble.

    Still overall good. Consumers appear to be fine. The jobs numbers are good. Today’s initial jobless claims fell, showing that the labor market is tight.

    Jobless claims don’t tell us much at this time. They will rise next week. The consumer did not have a good 2nd quarter, except that.

    The subprime worries are valid, but maybe it won’t matter much unless we see the unemployment situation degrade. We’re nowhere near that now.

    BS again, come on muckdog, the “employment situation” is mediocre just like it has been this entire recovery. Get it straight or get lost.

  21. Cherry commented on Jul 12

    Relax ac, Muck, we have been over the “labor market” time and again with you over the last 1.6 years. The Government numbers are bogus and the labor market isn’t that tight, definitely not full employment tight. I had the Kennedy-Clinton UE rate at 5.4% in June.

    I don’t see what was so impressive about today. It was one day and a sign volatility is spiking, which isn’t a good sign. Alot of investers blew off, they went happy. The problem is tomorrow which leads to hangover, whoops, more hedge funds are blowing up and Alt-A is dead. 300+loss.

  22. muckdog commented on Jul 12

    Cherry, don’t take this personally, but I don’t align myself with those who believe the government numbers are “bogus” or “made up.” Seems to me that most of these folks follow their political leanings more closely than the economic data. Or they cherry pick the news releases that confirm their views, and ignore or ridicule those news releases that don’t confirm their views. People are free to believe whatever they want to, but it all looks a little silly when reality is going in the opposite direction.

    I linked to this article back in May: June college grads faced one of the best hiring markets in years. Corporations are offering hiring bonuses, big screen TVs, etc., just to get these folks signed up.

    If the labor market wasn’t tight, would corporations be doing that?

  23. muckdog commented on Jul 12

    AC, you sound like a “Bush Economy Denier.”

    I don’t believe anyone can effectively argue that this is a bad economy. In order to do so, they fall in to the trap Cherry did where they have to claim all the numbers are bogus, made up, and flown in by black helicopters at night.

    Do you believe in efficient markets? Do you believe the stock and bond markets are completely fooled by the genius of Karl Rove?

  24. leylynn commented on Jul 12

    nice post BR! interesting commentary to say the least, but, as a softline analyst i must applaud the homework you do. thanks!

  25. ac commented on Jul 12

    Muck, you aren’t getting it.

    My view is how Bush “hypes” the economy as one of the best ever, but growth indicates rather a “garden variety” economy. Where did I say it was overly bad?

    The fact is, the labor market isn’t that tight and the economy is not pumping out jobs at a overly high level like 97-early 00 or 87-88 which has been long forgotten.

    Maybe this is the “goldilocks” economy, but it has weakness in several mid-western states and a busting housing market which because of this crack up boom cycle, will take years to deflate and impact the total economy as a whole. Hence, there is no goldilocks, just a economy underperforming compared to the rest of the world.

    That is the point, just tell what we have. A Global boom with no boom in the US. That is what has kept rates low FWIW. The payback for the 90’s has been a bitch.

  26. muckdog commented on Jul 12

    Ah, AC. You mean the good ol’ days when homeless people were being yanked from underneath bridges and made into web developers? Bubbles will do that sort of thing. And you’re right: The bubble aftermath from 2000-2002 was tough.

    But we have been in a slow and moderate expansion for a long time now. And that’s better than a boom (which is always followed by a bust). I’ll take 4+ years of ongoing “garden variety” economies with a 4.5% unemployment rate, low interest rates, low inflation, highest net wealth ever, up-trending stock market, etc. It’s not a bad thing, AC

    Cheers!

  27. Craig commented on Jul 14

    Oh and don’t forget that .70 USD.

    Suckers. It’s a shell game kids. They will give you all the wooden nickles you can handle.

    The idea here is TOTAL RETURN in REAL DOLLARS. Last time I checked the USD is at all time lows against almost all other currencies and hard assets. Why is oil going to 80? Because the USD is going the opposite direction. It isn’t only demand that drives prices, it’s also shrinking currency. We have a good dose of both.

    So all those BIG profits you are blabbing about need to have 30% deducted.

    Hows that economy look now?

    BTW, the sub-prime bubble/bust is now being replaced by the commercial RE/commodity bubble. Muck is simply trading one bubble for another. Now the bubble is for those who can buy entire companies, infrastructure, hard assets and commodities. They sure as hell aren’t buying subprime notes! You know, all that M&A stuff you see that is leveraged onto corporate balance sheets and then sold to him in this “greatest story never told”.

    And to defend his POV he MUST be incredibly wealthy, otherwise he’s simply a misdirected poor guy defending the wealthy. Like Kudlow.

  28. Ken Houghton commented on Jul 14

    There’s a K-Mart right in Penn Station; can’t be that difficult to find.

    (Data point: been there twice. Once in the early morning and once at rush hour. Layout not great, but probably serviceable if you frequent it. Customer service dubious, and checkout lines were not well staffed.

    But it may be atypical. Do not since the bankruptcy.

  29. John Doe commented on Aug 11

    I’m just wondering about your experience on swapalease.com. Was it good? easy? hard? a pain in the tuckus? Please advise.

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