Given all of the news on Retail sales — Black Friday, Cyber Monday, same store sales –  I thought this might make for a good topic for Bloggers Take. So what are your thoughts on the holiday shopping season? Is it important? What are your expectations — Good bad or different ?

A Tale of Two Retails

Is retail weak?  On the heels of lowered sales forecasts by Wal-Mart, that
question has moved front and center.  The chart below shows the lead up to the
holiday shopping season in the broad retail ETF (XRT; blue) and in Wal-Mart
stock (WMT; red).  Because Wal-Mart comprises less than 2% of the XRT fund, this
comparison gives us a nice of retail overall vs. Wal-Mart in particular.  For
comparison, I’ve added Target (TGT; yellow) and equalized them in price as of
7/5/06 to show relative performance.

Retail2

What we see is that retail has done well during the market rise since July,
2006. Target has been a particular winner.  Overall, it’s hard to make a case
for general retail weakness.  As we’ve approached the holiday period, however,
the performance of Wal-Mart has trailed considerably.  This has made a fine
pairs trade for a fundamental analyst able to sort out the stronger components
of XRT, such as Target, from the Wal-Marts. 

Brett Steenbarger, Traderfeed

~~~~

Barry’s question is timely because we cannot recall such an intense media focus on retail sales than we have seen this year. Our sense is that trying to play the holiday season retail sales game is for the vast majority of investors a mug’s game.  In short, the signal to noise ratio is far too low to generate any meaningful trade signals.  The number of crosscurrents present at this time of year is difficult for even the most experienced retail analysts to follow. For instance, think about how gift cards have changed the retail game over the last few years.  Gift card sales have taken on increasing importance for many retailers over the past few years.  Changing trends like this happen every year.  If you have you done your work on a stock or the sector, great, if not don’t get caught up in the frenzy surrounding what is supposed to be a joyous time of year.

Abnormal Returns

~~~

I expect a strong holiday shopping season.  I think that, post-election, consumers feel that something has changed, probably for the better. 

While they don’t have a good grasp of what will be different, they have a renewed optimism in the future that will help drive holiday spending. 

Stocks are up and real estate prices have not fallen as dramatically as expected in most cities.  Add that to a strong Q4 for retail and what you have is a good economy with plenty of steam to carry it through early 2007.  That said, I think Wall Street tends to overvalue a strong holiday shopping season.  If you are contemplating an investment strategy for 2007, I would focus more on interest rates and GDP, and look to international opportunities.

Rob May, Businesspundit.com

~~~

The media as well as bulls on Silicon Investor both went gone gaga over the
black Friday numbers reported by NRF while dismissing the numbers from Wal-Mart
as "just one store". Well Wal-Mart is not just one store it is the bellweather
store for the masses. But to top things off, the much touted sales data
presented by the NRS was not really sales data at all but customer surveys that
may bear little relationship to reality. This is just sloppy reporting by nearly
everyone picking up the story, including Bloomberg.

What I fail to
understand is how Bloomberg and other places can fall for this nonsense time and
time again. This is the direct equivalent of the Charley Brown / Lucy football
scene being played every Thanksgiving in real life.

In the meantime
there was little fanfare given to the massive 8.3% collapse in durable goods.
Yes, part of that collapse was aircraft, but orders for non-defense capital
goods excluding aircraft decreased by 5.1%, after rising 3.2% in September. In
addition the index of manufacturing activity slowed to 51.2 in October, from
52.9 in September and 54.5 in August. In the overall picture, consumer credit is
declining, housing starts are plunging, manufacturing activity is slowing, auto
inventories and home inventories are rising but the story headlines latch on to
the biggest "non-event" around, Black Friday.

Mike Shedlock / Mish’s Global Economic Trend Analysis

~~~

There is some divergent opinion as to how indebted the consumer actually is. Regardless of the reality here it seems to me that plenty of people will have no hesitaion to take on another $1500 in debt to ensure a "good" holiday season.

In that context the strength of this year’s holiday does not mean much for future behavior. What is more of an indicator of future behavior is the availability of credit, which based on my mail, is still healthy.

Roger Nusbaum, Random Roger

~~~

Category: Blog Spotlight, Retail

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Blogger’s Take: Holiday Retail Sales”

  1. bushsux says:

    Here is a test of technical analysis. Look at the daily chart of AAPL using candlesticks. Is that a top, or what??? Keep in mind that Cramer has been pounding the table on this one….is that a TOP, or what????
    LOL

  2. jj says:

    This year’s retail sales #’s will look better than the last few years due to the Calendar

    With an early Thanksgiving on Nov. 23 , there are 31 shopping days between Thanksgiving and Christmas this year — the last four years there were 30 days (2005) , 29(2004) , 27(2003) and 26 (2002)…..

    ……expect the spin to make it look better than an apples to apples comparison

  3. ~ Nona says:

    Good point, jj!

  4. dryfly says:

    Regardless of the reality here it seems to me that plenty of people will have no hesitaion to take on another $1500 in debt to ensure a “good” holiday season.

    I couldn’t have said it better unless I included a reference to urination and a large salty body of water.

  5. James says:

    Roger couldn’t have described the global financial economy better. As long as credit is flowing people can still get by, however at some point the law of diminishing returns will kick in. Greater amounts of credit will be required in order to keep the whole system going. This year we added 3 trillion dollars in credit, next year more will be required. other borrowers are taking the place where residential real estate left off. How long they can keep going without running into an accident is anyone’s guess.

  6. jj says:

    Swaps market inverts for only the 2nd time in last 15 as non-inversion notes crack …. strange when structured products start to fail —– LOL

  7. Kevin_r says:

    Swaps market inverts for only the 2nd time in last 15 as non-inversion notes crack …. strange when structured products start to fail —– LOL

    JJ,
    Could you point me to somewhere that explains what this means? It went right over my head and I want to learn.

  8. toddZ says:

    best line:

    “What is more of an indicator of future behavior is the availability of credit, which based on my mail, is still healthy.”

    Classic. LOL

  9. Juan de la O says:

    kevin,

    non-inversion notes are like range notes, they pay a non-callable coupon for a period, say 2 years, so long as the constant maturity swap is positive. But, should that curve invert – very rare – the mentioned notes switch from interest paying to not over the time of inversion.

    jj can correct or add more.

  10. m3 says:

    looks like joe six-pack has less cash to spend than previously thought:

    “Compensation up 1.4%, not 7.4%

    But the new data show that, instead of growing at a 7.4% annual rate in the second quarter, employee compensation actually grew just 1.4%. The revisions were reported by the BEA on Wednesday as part of its revision to gross domestic product data, based on updated BLS figures from tax records. Third-quarter compensation was also revised slightly lower.

    “The new data, however, show that real disposable incomes fell in the second quarter by 1.5%, rather than rising by 1.7%.

    “Consumers didn’t earn the money they spent in the second quarter, they borrowed it. The personal savings rate dipped to negative 1.4%, the lowest since the Great Depression, except for the negative 1.5% seen in the fourth quarter of last year after Hurricane Katrina.”

    http://tinyurl.com/y2ha28

  11. my1 says:

    Bushsux: It seems that your candle sticks may have missed something else…

    Steve Jobs is going to Jail for Backdating options?

    http://www.dailywealth.com/archive/2006/nov/2006_nov_29.asp?printdoc=print

  12. Michael C. says:

    >>>The personal savings rate dipped to negative 1.4%, the lowest since the Great Depression, except for the negative 1.5% seen in the fourth quarter of last year after Hurricane Katrina.<<<

    Is that the lowest before or after the Great Depression.

    Either way, that kind of scares the shit out of me.