Did Black Friday save the season? Beware the retail hype.
Barry Ritholtz
Washington Post
December 2 | Updated: Saturday, December 3, 10:20 PM


Retail sales are spectacular, up 16 percent from last year! The best Christmas in a decade!

If you opened a newspaper or flipped on a TV last weekend, you were deluged with statements hyperventilating about holiday retail sales. Declarations that this was the best Black Friday in years, and it bodes well for the holiday season.

Savvy investors have learned to take these over-the-top declarations with a grain of salt. If you have paid attention in the past, the reality is far different from the spin: No Virginia, surveys of our gift-shopping intentions do not reveal our actual purchases. We humans are bad at forecasting the future and, as individuals, we are especially poor at predicting our own economic behavior. Marketers and trade groups, well aware of this, exploit that knowledge.

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.

Let’s go back to the Black Friday hype, and see how this stacks up: Each year, we are deluged with “soft data” on Black Friday. We hear about foot traffic, personal surveys and expectations for the season. Overall, these early projections tend to paint a rosy picture of holiday spending.

The reports released with Black Friday and the holiday weekend are from trade groups representing retailers. (They do not hide this.) Each year, they make wildly optimistic projections, which are repeated in the media like clockwork. By the time the actual data come in, the projections have been forgotten. By then, we learn that early reports were pure hokum, put out by trade groups to create a “positive shopping environment.”

Let’s start with this whopper from an utterly breathless statement from the National Retail Federation (NRF):

“Traffic and spending were up both online and in stores, reaching historic highs. According to the survey, a record 226 million shoppers visited stores and Web sites over Black Friday weekend, up from 212 million last year. Digging deep into their holiday budgets, the average holiday shopper spent $398.62 this weekend, up from $365.34 last year. Total spending reached an estimated $52.4 billion.”

That would suggest that retail sales climbed 16 percent. They did not. Surveys where people forecast their future spending are pretty much worthless. They are far too unreliable to base sales forecasts upon.

When you conduct a survey, you are asking people to say what they plan to do. Hence, what you learn is what they believe about their future behavior. We are an unreliable bunch. If you want to learn how much people actually spent, you need to measure that at the cash register.

History has shown again and again that there is little correlation between our expectations and our actions. Yes, we want to save more for retirement, lose weight, get into shape. We say so each January. And by February, you will discover the yawning chasm between intentions and action.

So when those breathless retail sales surveys were released, we had no idea as to whether, and by exactly how much, sales might climb. The most that could be accurately said was that more people appeared to be in stores on Black Friday 2011 than in 2010. Indeed, that can be explained in part by the unseasonably warm weather around the country; as well as the extended store hours (including midnight Thanksgiving Day).

How far off have these surveys been in the past? Enormously. In 2005, based on a survey on Black Friday and Saturday, the NRF forecast a 22 percent increase in holiday shopping gains for the Thanksgiving weekend. The results? Up just 1 percent.

The same foolishness resurfaced again in 2006, with an 18.9 percent sales increase forecast. Of course, the reality was nowhere near that, with sales gains below 5 percent. Incidentally, it is not just Shopmas: The back-to-school-season was another opportunity to repeat the error. And in 2007, just as the recession was getting underway, they forecast a 4 percent gain in sales. What happened? Sales at U.S. retailers “unexpectedly” dropped 0.4 percent in December 2007, the weakest holiday season since 2002. In 2008, given the broad scale of the economic collapse, what’s perhaps most surprising was the expectations for a 2.2 percent sales gain (sales fell 6 percent). In 2010, Black Friday weekend sales rise were estimated at 9.2 percent, and overall sales were forecast to rise in November and December 2010 by 11 percent. (They rose 5.5 percent.)

You may have noticed that I omitted 2009. Coming out of the recession, with memories of the economic collapse fresh in everyone’s mind, the NRF’s 2009 Holiday Consumer Intentions and Actions Survey for holiday shopping reflected an awe-inspiring drop of 43 percent versus 2008. And of course, sales were nowhere near that level — they rose about 3 percent.

So far this year, the NRF is running true to form. According to actual spending data from MasterCard Advisors SpendingPulse, retail sales for the four-day Thanksgiving holiday weekend rose 8.7 percent — about half of the NRF’s estimate. SpendingPulse tracks actual purchases made with cash, checks, credit cards and debit cards as the basis of their analysis.

What is the bottom line? We have been adding jobs this year versus the last two years, and we should see some modest improvement in holiday sales. Easy comparables, better weather (plus inflation) suggest an improvement in retail sales versus 2010, consistent with the first 10 months of the year.

But holiday sales gains of 16 percent? Don’t bet your 401(k) money on it . . .

Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture.


Year NRF Survey Forecast Actual Holiday Sales
2005 22% 1%
2006 18.9% 5%
2007 4% -0.4%
2008 2.2% -6.0%
2009 -43% 3%
2010 9.2% 5.5%
2011 16.6% ??


Did Black Friday save the season? Beware the retail hype
Barry Ritholtz,
Washington Post, December 2 2011  

Category: Consumer Spending, Data Analysis

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.

9 Responses to “Beware the retail hype”

  1. VennData says:

    “…The National Retail Federation said Sunday that spending per shopper surged 9.1 percent over last year — the biggest increase since 2006 — to an average of almost $400 a customer. In all, 6.6 percent more shoppers visited stores on the Thanksgiving weekend than last year…”


    Doesn’t 365.34 times 1.09 equals 398.22 approx 398.62? Are they about right, assuming the base numbers? What am I missing?

  2. Greg0658 says:

    how tuned-in are our super-computers? if the flatscreen-tv that sold for 50% off on BlackFriday ends up being traded for a bag of coke at original retail price+ …. I’ll be the round’about – make your mind out’n’out
    (I have no idea how many grams/ounces that would be)
    (mr.potus I never tried it – learned lessons on pot)

  3. CardinalRam says:

    I just got back from a business trip to Minneapolis. Thursday night I went to the Mall of the Americas. There was no problem getting a parking place close to the entrance. Inside, traffic was very light. People who were leaving tended to have only one package. The sales help looked a bit bored.

    I also find it very interesting that Friday’s USA TODAY had a article about people putting themselves on their own Christmas shopping list. It seemed to me to be a bald attempt to gin up sales, “You aren’t buying a lot for other people? Then buy something for yourself!”

    In the past, during ‘good Christmas shopping seasons’, when I visited customers, small talk would include what presents people were buying. This year…nothing. No discussion of it at all. In the Twin Cities, the hot topic is the push by the Vikings ownership to build a new stadium…with public funding!

    Don’t raise taxes to pay for schools, road repair, or first responder services, but if an NFL team owner “trail(s) the NFL in nearly every measure of stadium revenue”*, then by all means, the public should be taxed so he can increase his revenue!

    *AP News http://sports.yahoo.com/nfl/news?slug=ap-vikingsstadium

  4. theexpertisin says:

    Great post, BR.

    We need more reviews of data and can’t miss predictions from “experts” that have been very wrong in retrospect.

  5. PDS says:

    BR…just got back from a biz trip to LA….took taxi ride along Wilshire Blvd in Beverly Hills…..the high number of empty retail store fronts was shocking…..

  6. rktbrkr says:

    NRF makes NAR look “spot on” with their forecasts (which are also biased but more moderate & consistent)

    (Spot on is contending with “went missing” as my most disliked britishism, what was wrong with disappeared?)

  7. rktbrkr says:

    Going out to cruise a couple of Jersey mauls, I’ll submit my “boots on the ground” report later LOL

  8. [...] Barry Ritholtz is skeptical of predictions of a big resurgence in retail sales: What is the bottom line? We have been adding jobs this year versus the last two years, and we should see some modest improvement in holiday sales. Easy comparables, better weather (plus inflation) suggest an improvement in retail sales versus 2010, consistent with the first 10 months of the year. [...]

  9. [...] Beware the retail hype (December 10th, 2011) [...]