My Sunday Washington Post Business Section column is out. This morning, we look at retail sales, inflation, and forecasts: Did Black Friday save the season? Beware the retail hype.

The key takeaway is that sales improved over last year consistent with the first 10 months of 20121 — but the insane forecasts from the usual trade groups are as they have always been — wildly, exuberantly, too optimistic.

Here’s an excerpt from the column:

“Let’s take a closer look at the annual hype that kicks off the season I like to call “Shopmas.” The actual data are much more revealing about the state of the consumer, the retail sector and the overall economy than the holiday hype.

We begin with a quick review of the retail sector in 2011: Sales improved versus 2010 by 3 to 4 percent. We use year-over-year comparisons because of the highly seasonal nature of retail sales. In 2010, sales were fairly soft, in part because much of the nation experienced severe weather. In the business, we call those “easy comps” — a low comparable data point that should be easy to beat. Based on the first 10 months of the year, holiday shopping in 2011 should see similar improvements. Consistent with the year-over-year retail numbers, expect sales gains of 3 to 4 percent. Even so, these numbers come with caveats.

Prices in some products have risen — in some cases, substantially. The three most noteworthy are gasoline (up 15 percent), food (5 percent) and cotton (a whopping 230 percent). The price pressures on these — all consumer staples — are reflected in the total retail sales data. When we look at total sales, we get a sense of how much the nation is spending — but, because of inflation, not how many goods people bought. Based on that data, we can conclude that a decent amount of the total dollar gains in retail sales are not improvements, but rather price inflation.”


My favorite part of the piece is where I compare the past 5 years of Shopmas NRF forecasts versus actual sales. I won’t spoiul the ending, but suffice it to say, hilarity ensues!
click for ginormous version of print edition



Did Black Friday save the season? Beware the retail hype.
Barry Ritholtz
Washington Post, December 4, 2011   

WP 12.4.11 Retail (PDF)

Category: Apprenticed Investor, Consumer Spending, Psychology, 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.

13 Responses to “Beware the Black Friday Retail Hype”

  1. Richard R says:

    I was in a Costco on Friday in Pittsburgh that was empty and according to the workers had been very slow all week. This store is in an area of multiple malls and big boxes that in the past has generated insane traffic during the Christmas season. Traffic was light – no more than an average shopping day any time in the year.

  2. rktbrkr says:

    It’s hard to believe but the NRF (retail) forecasts are even less accurate than NAR (real estate) forecasts and DOL jobs forecasts – and at least the DOL forecasts are subsequently adjusted towards reality after the headline number has done it’s thing. Every sales organization has a built in bias to hype it’s wares. If Economics is the Dismal Science then Sales is Irrationally Exuberant Art.

    The weather was terrific through much of the country over Black friday, if it was less than perfect that would have been right up front in the NRF PR blasts.

    Looking at the NRF numbers over the past 7 years you could say they are no more accurate than a random number generator, actually much less accurate because they are biased not random.

  3. Julia Chestnut says:

    Gosh, BR, keep talking straight in the WaPo like this, and it might be almost worth the ink to print it. Another nice article.

  4. Julia Chestnut says:

    Hey, RichardR, I have to pass a mall to get home from work myself. Even last year, the traffic around the mall slowed down my commute considerably: there’s a merge just past that point where 4 lanes go to 2, so you really feel any addition to the traffic at that point. This year? Not so bad. One tiny data point, but I’m seeing the same thing you are.

  5. rktbrkr says:

    Barry, the Grinch the stole Shopmas…

    I was near a K Mart on the Jersey Shore mid morn on Black friday and the parking lot was emptier than an average sat morn. There are a lot of Mexicans who pay with cash at this particular store and I couldn’t see if the bike rack was full.

    The weather in the Northeast was terrific so there was probably a lot of window shopping traffic for those who can handle the pepper spray and square badge muggings. we will make you safer!

  6. Eliza says:

    Superb article.

  7. dead hobo says:

    Yesterday early morning, I was in a Menards. The few lines that were open had long lines and each customer had several items.

    As long as gasoline and natural gas remain low, XMAS will see a good season.

  8. constantnormal says:

    Black Friday, mall traffic, prices … it all means far less now than it used to … due to Cyber Monday and the large amount of goods being imported from places where labor costs are trivial.

    So what is the xyz product you’re buying over the web costs 50% of what it did last year, if the retailer selling it is making the same (or greater) amount of profit on the sale?

    I think we’re going to have to wait for them to show us the money to know whether this holiday season was a big deal for the retailers.

    But I do believe that the consumer did not have as much to spend this year, so the prices had better be lower.

  9. DonF says:

    Great stuff. I’d like to add that EVEN IF retail sales rise this year over last, the first thing I will do is analyze margins. This year I have seen more discounted items and free shipping offers than I have ever seen before. Again, that is anecdotal but it seems like a race to grab revenue, and it just cannot be good for the bottom line. Although everyone seems to be focused on top line, I just think that can be deceiving.

    By the way, I worked at a marketing research (consumer insights) company that founded it’s whole business model on the fact that what people say and do are two different things. And the behavior is where they spend the dollars.

  10. beaufou says:

    In 2008, the word was that the “party was over”, we had spent our way into a financial disaster and it was time for change
    2011, good news, white trash is spending a little more on shit they don’t need; the economy is sound again. (scratching my head)

  11. Marc P says:

    A point overlooked by the media: we should hope that “Shopmas” spending is not going up.

    Incomes are flat over the past decade. If sales are up, it can only be due to increased borrowing. Increased household borrowing is a bad thing, and as we have learned, must come to a bad end.

    Second, households have large debts that they need to reduce. Extra borrowing to spend more shows poor collective judgment. Governmental policymakers and responsible newspaper publishers should not encourage poor collective judgment.

    Last, household borrowing to buy disposable goods reduces household wealth. It is foolish to encourage households to reduce wealth, and works to the detriment of the country.

  12. BusSchDean says:

    Perhaps we can judge future Black Fridays by the amount of pepper spray purchased just prior by consumers.