Retail Follow Up

I am meetings this morning, but I needed to get a quick follow up to yesterday’s Retail data.

It was mixed, with a negative bias lurking beneath the headlines. A quick review of who reported better sales and who stunk up the joint very quickly reveals a pattern:

Wal-Mart (WMT), Costco (COST) and BJs (BJ) all reported better than expected retail sales for June. Disappointing retail sales were the soft goods, (i.e,  clothing), and nearly all of the Department stores.

As we noted yesterday, Wal-Mart reported same store sales gains of 2.4% vs. its 1% to 2% forecast. They stated that home goods and apparel sales were  weak but grocery sales surged.

There are two reasons for this. We discussed the FOOD INFLATION factor extensively yesterday. The second element is "retail slumming." Middle class families are now shopping downscale, looking to save some cash. Whole Food (WFMI) shoppers are going to Krogers, who’s former clients are going to Target (TGT), whose former customers are now in BJs and CostCo’s, whose former clients are going to Wal-Mart.

This is not a sign of strength.

See below for explicit details:

: “The number 1 problem is that traffic is down, that created a bigger problem for department stores, said Richard Hastings, a retail analyst at Smyth-Bernard Sands…” 

CNBC: Howard Davidowitz (, a retail consultant appeared, just before the NYSE close, and said retailers are in an “absolute collapse.” 

Reuters: Rising energy, food costs test Fed core inflation focus  “Swiftly rising food and energy costs are challenging the Federal Reserve’s practice of focusing heavily on core prices in setting monetary policy, but the central bank shows little sign of changing its thinking… ‘It must be obvious to the citizenry of this country that there’s… inflation,’ said Steve Axilrod, a former  staff director for monetary and financial policy at the Fed [for Volcker]. ‘One … definition of inflation is  when the (average shopper) notices it in the grocery store.’”


More later . . .

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What's been said:

Discussions found on the web:
  1. SINGER commented on Jul 13

    and davidowitz knows the deal

  2. Sven commented on Jul 13

    So…it was a BS rally! ;)

    Couldn’t resist.

  3. costa commented on Jul 13

    Along with the slumming Dollar stores sales are up. Family Dollar June same-store sales up 1.5%
    Family Dollar June same-store sales est. up 1.9%
    Family Dollar June sales up 4.6% to $646 mln
    Dollar Tree same store sales were up as well. Thats a good indication of weakness in the consumer

  4. Momo Fader commented on Jul 13

    Dow Futures settled down a bit after the U.S. Retail numbers came out. Certainly nothing on that front to justify yesterday.

    jmf, what does it mean to say, “It’s all about the liquidity”? We need to think about the sources, if we care to anticipate consequences.

    The dollar and the yen are in a race to the bottom. They still have some buoyancy, so it’s a slow affair … as if watching autumn leaves fall and sink to the bottom of a lake. The gold bugs are all atwitter about the approaching multi-year low in dollar index.

    Speaking of autumns, appears we may have a doozy abrewing. I offer that a bullshit rally is the one that occurs right before the bear market. And speaking of buoancy, there are a shit-load of turd stocks popping. Short squeezes never last terribly long, and if they’re engineered the goal is to sell on the part of the engineers.

  5. Gary commented on Jul 13

    I’ve been trying to tell everyone since Mar that the big money was buying. As long as they are buying this market is going up. Last week the combined net long position of all the index futures contracts was the largest in history. You would have to be crazy to stand in front of that train. Wait until the commercials start to sell before shorting this market.

  6. mhm commented on Jul 13

    Momo, may I reformat your words to match the yen mood:

    “as if watching autumn
    leaves fall and sink
    to the bottom of a lake”

  7. sn commented on Jul 13

    mhm: very clever!

  8. spongetoddsquarepants commented on Jul 13

    Today’s lousy retail sales number blows up the theory that yesterday’s rally was because retail sales were strong.

  9. ashley commented on Jul 13

    in an absolute colapse? who said that?

  10. brion commented on Jul 13

    my FDO puts…
    like a slurpee in summer.
    It’s different this time…

  11. mp commented on Jul 13

    in an absolute colapse? who said that?

    Davidowitz, in reference to department store sales.

  12. mp commented on Jul 13

    I don’t know where everyone is getting this “WalMart came in better than expected” bullshit. Walmart’s sales are in a down cycle, have been all year, and June came in exactly as expected. June’s sales ALWAYS bounce. I don’t see what the big deal is.

  13. MarkTX commented on Jul 13

    so do we hit 14k today or Monday morning?

    And why would anyone worry about Retail Numbers, CPI, Unemployment, Etc….

    The market obviously does not care!

  14. mp commented on Jul 13

    Barry, may I suggest that you take a look at this Excel file with embedded graphic? This is something I posted on the retail thread at CR’s site and shows that June sales were exactly in line with their cycle. Among other things, it suggests the possibility that WalMart, who should know their own cycle, could have lowered guidance in order to exceed expectations.

  15. Aaron Byrnes commented on Jul 14

    From the Reuters article- “Expectations of higher inflation could lead workers to push harder for compensating wage gains and businesses to try harder to raise selling prices — a classic wage-price spiral.”

    Allow me to correct it- Expectations of higher inflation could lead workers to push harder for compensating wage gains and businesses to try harder to offshore those jobs or lobby Congress to jack up H1B visa limits — a classic wage suppression/ inflation masking formula. (And ta-da another batch of jobs that Americans suddenly “won’t do.”)

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