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

Posted By Barry Ritholtz On November 28, 2005 @ 12:33 pm In Retail | Comments Disabled

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 [1]. 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 [2] 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 [3] 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 [4] when compared with last year’s holiday season. Third, according to Visa, Credit Card usage was up dramatically – about a 14% increase [5] 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 [6].” Um, no. At least the NYT was more circumspect, with a column titled: Mall Stores See Trouble in Sales Data. [7]

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.

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UPDATE November 28, 2005  1:58 pm

Here’s the actual data from the NFR:
Download NRF_Black_Friday_2005_Results.xls [8]

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UPDATE November 30, 2005  5:28 am

WSJ Numbers Guy [9] takes a swipe at the NRF data
Shorter URL [10]:  http://tinyurl.com/7blxe

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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 [11]

 


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URL to article: http://www.ritholtz.com/blog/2005/11/don%e2%80%99t-believe-the-hype-a-very-mixed-retail-picture/

URLs in this post:

[1] breathless reporting of holiday sales: http://www.nrf.com/content/default.asp?folder=press/release2005&file=blkfriresults1105.htm&bhcp=1

[2] NRF report: http://www.nrf.com/content/default.asp?folder=press/holiday&file=BlkFriregion1105.htm&bhcp=1

[3] slightly softer sales: http://www.shoppertrak.com/news_retail_sales_112605.php

[4] discounting: http://online.wsj.com/article/SB113292430807906543.html

[5] a 14% increase: http://www.nytimes.com/2005/11/27/national/27retail.html?ex=1290747600&en=d9f2f1c57e46213c&ei=5090&partner=rssuserland&emc=rss

[6] First Holiday Shopping Weekend, Sets a Blistering Pace: http://online.wsj.com/article/SB113310493321007537.html

[7] Mall Stores See Trouble in Sales Data.: http://www.nytimes.com/2005/11/28/business/28retail.html?ex=1290834000&en=372ee37814e4df19&ei=5090&partner=rssuserland&emc=rss

[8] Download NRF_Black_Friday_2005_Results.xls: http://bigpicture.typepad.com/comments/files/nrf_black_friday_2005_results.xls

[9] WSJ Numbers Guy: http://online.wsj.com/public/article/SB113329592610109317-6PRXoDu8lOnvJu6_cH5EwwSk82M_20061129.html?mod=blogs

[10] Shorter URL: http://tinyurl.com/7blxe

[11] Download Macke’s Retail Roundup.xls: http://bigpicture.typepad.com/comments/files/MVNovember_Macke1.xls

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