Let us now delve into the nether world of Retail-Sales-Excuse-making. Those of you who may be unfamiliar with this land are advised to brush up on your Lewis Carroll, as we are now about to chase the white rabbit down the rabbit hole.

When December sales were announced, they were disappointing. "Do not worry!" we were told, for the holiday shopping season no longer ends on December 25th. Gift cards were to be the savior of retail, and all manner of data were trotted out to prove how they had been growing 25% year-over-year, were this many billions of dollars, were about to hit the malls and stores after New Year’s Eve, you will see. So said the Knave of Hearts.

Alas, it was not to be. With December behind us, in January, we were told retail sales were bad because "It was too warm." If your business is selling mittens and scarves and winter coats, this would make some sense, as it was, after all, one of the warmest Januarys on record.

The ever curious Alice asked "What happened to all of those billions of dollars in gift cards that  were the rationale for the weak December? Why would good weather, unseasonably warm winter weather, 60 degrees in the Northeast weather, prevent those gift card recipients from spending their booty?"

In an illogical land, Alice had unfortunately reached a logical point: Why would Weather — assuming it wasn’t tornadoes or floods or locusts or slaying of the first born — have prevented all those billions of dollars in gift cards from being redeemed? Memory fails to recall shoppers at Best Buy, Amazon, Circuit City, or Home Depot gift cards expressing issues with unseasonably nice weather as why they didn’t exchange their gift cards for goods. Live and learn.

Which brings us to February. Alice, our astute observer of retail, asked "If January was too warm for retailers, then surely the cold snap in February must have helped!"  But it was no aid, as February sales fell below expectations, a disappointment, despite the respite from January’s heat wave.

Pity poor Alice, who has not yet learned that once you go through the Retail Looking Glass, walking toward your desired destination only gets you further and further away. Thus, if warm weather prevents the sale of winter garments, then cold weather prevent even more sales.

This is at it should be, for "Wonderland" is after all, an imaginary place. In the world of Retail, the Mad Hatter and the March Hare are at a never-ending tea party, concocting excuses and rationalizations, but refusing to admit whatever the Queen of Hearts can plainly see: a clear trend of slowing, disappointing sales.

After the Tea Party ended, there was but a single smile — the one left behind by the Chesire Cat, who knowing what was coming next — a recession as likely as not — wandered off, leaving those at tea party to set about the new month’s work: Coming up with the next nonsensical excuse for why March sales will have disappointed.

And then Alice awoke . . .

Category: Economy, 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.

17 Responses to “Through The Retail Looking Glass”

  1. KirkH says:

    The moral: David Lereah is on Acid? It’s suddenly all so clear.

  2. Mike M says:

    Good Post. Recession is highly likely. Even a slowdown coupled with higher wage pressure will destroy profit margins and earnings.

  3. theroxylandr says:

    By my understanding the retail sales are one of the very few LEADING indicators that we have in those times.

    Most of indicators are coincident (like jobs) or trailing (like existing home sales). They will drop when recession starts or even after, when recession will be already over.

  4. wally says:

    Is that larry kudlow humming Jefferson Airplane?

  5. Wally –
    Maybe Jefferson Starship’s Miracles?

    If only you believe like I believe, baby
    Wed get by
    If only you believe in miracles, baby
    So would i
    If only you believe like I believe, baby
    Wed get by
    If only you believe in miracles, baby
    So would i.

  6. semper fubar says:

    See- proof positive that we DO have a Goldilocks economy!

    January was too hot and February was too cold….

  7. brion says:

    “One BIP makes you larger and
    one BIP makes you small.
    And the one that
    Bernanke gives you
    don’t do anything at all

    Go ask Greenie-
    when he’s at the mall……

  8. fiat lux says:

    ROFL @ brion.

  9. don says:

    Hey don’t blame me – I just bought a lawn mower yesterday.

  10. steve says:

    Wait a minuite- why do customers redeeming gift cards help retail profits in any way? They *already have* the money. Seems to me people who cash in their cards are actually a libility.

  11. RW says:

    Good point steve. Even if those cashing in their gift cards buy additional merchandise beyond the value of the card, as many probably do, the time the retailer had the cash from the original card purchase would have previously registered as pure profit just like an un-cashed traveler’s check or unused postage stamp would, at least one would think so.

  12. wunsacon says:

    Gift cards should not be counted as income. Credits go to the “cash” asset and a “gift card” liability.

    If that’s not how it works, I’d be surprised.

  13. Big Al says:

    But some of the money is pure profit, as only a percentage are cashed, before the expiry date.Though I heard that the Government wants to stop this.

  14. rex says:

    Retailers can’t book income from gift cards until they are redeemed.

  15. Winston Munn says:

    “Retailers can’t book income from gift cards until they are redeemed.”

    This seems to be a comment from Lewis Carrol himself – I believe the wording is more apt as “retailers shouldn’t book income….”

    See Enron, World-Com, Crazy Eddie

  16. Frankie says:

    “a slowdown coupled with higher wage pressure”

    Quid? Come Again? The consumer consumes. And they makes +60% of the domestic economy. To do so, he/she need disposable income. With the very slow uptick in wages since 2001, I kinda don’t get why in the world more disposable income (at last!) would crimp economic growth.

    Unless of course, one subscribes to the argument that there is never too high a profit, but that any growth in wages shall forcibly bring the 7 Biblical Plagues to the economy at large.

    Somehow, I find the cutting power of this argument low, even for mustard or melted butter.

    But that is just me.

    Francois

  17. Lee D says:

    I just spit coffee out my nose while reading this. Thanks!