Thanksgiving is but a few days away. We celebrate by the giving of thanks for whatever bounty has come your way. It is a warm and wonderful holiday full of family and tryptophan and good cheer.

Black Friday, the day after turkey day, is the official kick off of the season I like to call “Shopmas.” The media will have blanket coverage of all things retail. The intense focus with be a potent combination of PR hype and wishful thinking that if history holds will be entirely wrong.

The annual fabrication of seasonal retail sales data is an American holiday tradition.  Sometime over the next week, you can expect to see/read/hear the following lie: “Retail sales over the holiday weekend were surprisingly strong, up XX percent from last year. This bodes well for the upcoming holiday shopping season.”

If this were written accurately, it would instead read something like this: “We don’t know how strong Black Friday Sales were just yet, and wont for a few days. We don’t know how this holiday retail season will stack up against last year’s; we certainly haven’t the foggiest clue as to how the rest of the holiday season will go.”

This has been a pet peeve of mine for too many years to count; see the “previously” list at end.

There are several perpetrators of this annual fraud, but the biggest one is the National Retail Federation. Each year, it commissions a Holiday Consumer Intentions and Actions Survey. It is, at best, utterly worthless; at worst, it is a misleading, money-losing slice of PR propaganda, mindlessly parroted by lazy journalists who should be required to have the word “innumerate” tattooed on their collective foreheads. Or, if their religions do not allow tattoos, then their resumes.

Why is the annual exercise worthless?

Simply stated, the methodology employed by the NRF survey is defective. What happens is that people are stopped heading into a mall, asked how much they spent last year, and how much they plan on spending this year. That increase is how much of the press will misreport sales for the upcoming holiday season.

Why is this defective? The surveys bear no correlation relative to actual future retail sales. The conclusions reached (and repeated ad nauseum) are not supported by the data.

There are several reasons for this: First, people have no idea what they spent last year. No clue whatsoever. A surveyor stops someone on the way into a mall or other retail locale, asks them a few questions, the answers to which range between wild guesses and complete fabrications.

If you doubt what I am telling you, write down in the next 30 seconds what you personally spent last holiday season on all gift purchases. Note that I have given you about 25 seconds longer than most people spend coming up with an answer to the survey questions. Now take a look at your checking account, credit card and Amex statements for November and December. How close did you come? Yeah, I thought so.

Now you know the baseline number is off considerably. Let’s look at the next step: Asking people to forecast their own spending. There is a treasure trove of academic research on the subject, which is incontrovertible. It proves beyond any doubt that You Humans have no idea what you will do in the future. Forget forecasting gross domestic product or nonfarm payrolls next year, shoppers have no idea what they are going to spend next week, let alone the holiday season.

Why is this? We have learned through our study of human psychology that surveys actually query what people believe they will do. In other words, what you learn is what it is they imagine their future behavior might be. History repeatedly teaches us there is no correlation between our expectations and our actual actions. If you doubt that, consider the annual resolutions made each January: We all want to stop smoking, lose weight, save more for retirement, get in shape. Go to any gym and see how busy treadmills and exercycles are each January. By mid-February, they are forlorn and lonely exercise machines. That reflects the chasm between intentions and action.

Indeed, that’s how we see this play out in the real world. The track records of these surveys are awful. In 2005, the NRF forecast a 22 percent increase in holiday shopping gains for the Thanksgiving weekend. Full holiday retail sales were up just 1 percent. In 2006, it was 18.9 percent sales increase, versus less than 5 percent actual gains. In 2007, a 4 percent gain was actually a 0.4 percent drop. NRF forecasts for 2008 were even worse, 2.2 percent sales gain versus a drop of 6 percent.

But nothing compares to the NRF’s 2009 Holiday Consumer Intentions and Actions Survey for holiday shopping — it forecast a stunning 43 percent fall versus actual sales, which were up about 3 percent.

All told, this exercise a poorly conceived act of PR frippery, with no correlation to actual retail sales, and even less to corporate profits. Journalists should explain it intelligently, explaining how little these surveys actually correlate to increase in sales.

Investors who don’t enjoy losing money should ignore the media coverage of these misleading, inaccurate surveys with extreme prejudice.


Did Black Friday save the season? Beware the retail hype. (Washington Post, Dec. 4, 2011)

Retail Sales Disappoint on False Black Friday Reports (Dec. 13th, 2011)

No, Black Friday Sales Were Not Up 16% (not even 6%) (Nov. 28th, 2011)

Entering the Holiday Shopping Season (Beware Surveys!) (Oct. 28th, 2009)

Spinning Black Friday Retail Sales (Dec. 1, 2008)

Repeat After Me: Spending Surveys Are Meaningless (Oct. 2007)

More Bad Data from the NRF? (Nov. 2006)

Holiday Sales Numbers Don’t Add Up (Dec. 1, 2005)



Category: Bad Math, Consumer Spending, Really, really bad calls

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.

3 Responses to “Enjoy Black Friday But Ignore NRF Surveys”

  1. scecman says:

    Now let’s see if BR’s preemptive strike against this phenomena will have any effect whatsoever…I bet even Bloomberg will still screw this up!

  2. We don’t need data to short XRT ($88) and MA ($760) in anticipation of being disappointed. We’re using options, of course, to leverage the trades but look at LGF today – big hit movie but not “enough” to satisfy lunatic expectations. That’s a story we’re going to hear often over the next couple of months, into Q4 earnings reports as it’s very hard to justify why MA, for example, should have a 30x multiple to earnings – as if nothing can possibly interrupt consumer spending between now and 2016, so they can grow into their current valuation.

    Maybe it’s the “new normal” – after all, AMZN only wishes they would earn $1 this year and they are priced at $377. Next year, they HOPE to earn $2.67, still a p/e of 141 IF they grow earnings 300% in 12 months. That one we’re actually too scared to short because logic and AMZN’s market cap don’t even occupy the same planes of existence.

  3. Rohr says:

    Shopmas indeed. And what about all the guys open on Thanksgiving Day? How did the one actual Day of Relief from the incessant retail promo jazzing go away. Did their focus groups tell them there were that many folks who couldn’t stand a single full day each year with their families?
    I thought the line, “Thanksgiving is the one day each year when Americans get together with the whole family to remind themselves why they only do it once a year” was a joke. Evidently the retailers think it’s true.
    Personally I am boycotting any of the stores who open on T-Day for the balance of the holiday season… it’s obscene.