Posts filed under “Consumer Spending”

Surprisingly Strong Back-to-School Sales

We moved to much larger quarters yesterday, and I am somewhat out of the loop, as we await Verizon to hook up our big fat pipes, office furniture, etc. Hence, this quick, Starbucks-sourced, caffeine-fueled update.

I was not expecting very much in terms of back-to-school sales, but so far, most of what we have heard from the retailers was rather robust.

Wal-Mart reported a higher-than-expected 3.1 percent rise in August sales, almost double the 1.6% expectations. While some of the gains may be attributable to food inflation, the world’s largest retailer has been very aggressive about price cuts. Reuters noted that since July, Wal-Mart "announced price cuts of as much as 50 percent on 16,000 items — including school supplies and backpacks, to jump-start back-to-school sales."

The big winners in the same-store-sales data were Saks (plus 18.2%), Zumiez (plus 17.4%),  American Eagle Outfitters (plus 9%), Target (plus 6.1%), and Abercrombie & Fitch (plus 6%).

I mentioned a few weeks ago on Kudlow that this would be a telling sign of the strength of the U.S.consumer — and on first glance, its much better than I expected.


Good sortable table from the (free) WSWJ

click for sortable table


Retailers Post Generally Strong Sales During Back-to-School Period
WSJ, September 6, 2007 8:48 a.m.

Wal-Mart August sales beat expectations 
Reuters, September 6, 2007

WSJ, Back to School

Category: Consumer Spending, Economy, Retail

Rising Defaults on Credit Card Bills

Category: Consumer Spending, Credit, Economy, Psychology

Construction Employment, Contractors, Jobs

Category: Consumer Spending, Employment, Real Estate

How Are We Paying Off SubPrime Mortgages?

Category: Consumer Spending, Credit, Psychology, Real Estate

The Cheapest Days to Buy Certain Items

Category: Consumer Spending, Retail

Retail Roundup

Category: Consumer Spending, Economy, Retail

The latest Agflation news: 8% increase in food prices

Category: Consumer Spending, Inflation, Psychology

Media Appearance: Bloomberg TV (07/13/07)

Category: Consumer Spending, Media, Retail

Retail Follow Up

Category: Consumer Spending, Data Analysis, Economy, Inflation, Retail

“This is a bullshit rally!”

Fascinating and instructive conversation with a few of our traders/clients this afternoon, including a hedge fund momentum gunner who asked me "if this rally really mattered."

The answer is simply if it goes against you, it matters to your bottom line and/or your clients net for the year. If you were long going into this you made money, you showed a better P&L, your assets under management grew, your clients are happy. If you were short, you got your nuts squeezed, and that’s that.

More importantly, the S&P cleared key resistance, the spread triple top so many technicians have been talking about is now toast (See chart at bottom). If this breakout holds holds the next couple of days, that will inform of us about the technical strength right here, and if it fails, that will also be quite instructive. Indeed, this is shaping up to be quite an important rally. 

So to answer the original question, yes, this rally matters.

"This is a bullshit rally"  he said.

I asked him Why? Specifically, I ask:

"Do you disagree with this because you were positioned improperly, or because you cannot find a rational basis for today’s move? Do either of those things matter?"

No answer. He then asks me, "What did you think of today’s Retail data?"

Sigh. . . I said it was weak, that most retailers were doing only fair, that in addition to anyone home-related (i.e., Home Depot (HD) and Sears (SHLD)), we saw the Department stores doing poorly, Macy’s (M) and JCPenney  (JCP). We already heard Target (TGT) was at the low end of their range.

Here comes the money shot:  "And Wal-Mart" he asked?

Mediocre. They don’t break out food (as they do energy), but we can draw some assumptions from their breakdown between Wal-mart and Sam’s Price Club (see our earlier post), as well as what BJs said. As we learned today, Food sales at Wal-Mart, Sam’s, Cost-Co (COST) and BJ’s Warehouse (BJ) were robust.

Here’s the key line from BJ’s report:

"Sales of food increased by 6% and sales of general merchandise increased by
approximately 1%."

So to answer all of his queries: yes, today’s rally mattered. Yes, the retail sales data was weak. Yes, it was essentially a celebration of higher food prices.

However, if you are looking for a rational basis for the day to day movements of markets, if you seek to find a degree of serenity by understanding why markets do what they do short term (A/K/A noise), well then you are going to drive yourself insane.


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Category: Consumer Spending, Markets, Psychology, Retail, Technical Analysis, Trading