The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

If its the Monday after Black Friday, then its national hype the fabricated data day!

Every year around this time, we get a series of loose reports coincident with Black Friday and the holiday weekend. Each year, they are wildly optimistic. And like clockwork, the media idiotically repeats these trade organizations spin like its gospel. When the data finally comes in, we learn that the early reports were pure hokum, put out by trade groups to create shopping hype. (Yes, the Media ALWAYS screws the pooch big time on this one, with the occasional exception).

Let’s start with this whopper from an utterly breathless press release from the National Retail Federation:

“U.S. retail sales during Thanksgiving weekend climbed 16 percent to a record as shoppers flocked to stores earlier and spent more, according to the National Retail Federation.

Sales totaled $52.4 billion, and the average shopper spent $398.62 during the holiday weekend, up from $365.34 a year earlier, the Washington-based trade group said in a statement today, citing a survey conducted by BIGresearch. More than a third of that — an average of $150.53 — was spent online.”

No, retail sales did not climb 16%. Surveys where people forecast their own future spending are, as we have seen repeatedly in the past, pretty much worthless.

We actually have no idea just yet as to whether, and exactly how much, sales climbed. The data simply is not in yet. The most you can accurately say is according to some foot traffic measurements, more people appeared to be in stores on Black Friday 2011 than in 2010.

Another absurd example: Does any one actually believe “nearly one-quarter (24.4%) of Black Friday shoppers were at the stores by midnight on Black Friday”? Perhaps the NRF competing with the NAR for title of most ridiculous trade group.

Next up is ShopperTrak, who claimed a 6.6% gain in sales:

“Shoppers packed stores and spent money in record numbers on Black Friday, early surveys show, a phenomenon that analysts call a hopeful sign for the U.S economy after months of up-and-down consumer spending.

Black Friday sales were up 6.6 percent over last year and foot traffic in stores was up 5.1 percent, according to ShopperTrak, a Chicago-based research firm. The year-to-year spending increase was the greatest since 2007, the firm reported . . .”

What is the basis of that 6.6% gain? ShopperTrak “uses equipment installed in stores to measure traffic.” But that does not measure changes in window shoppers vs buyers from year to year, how much money and or credit people have, how large their holiday budgets are, or how much they are willing to spend. It is a very poor system for forecasting actual sales.

The fact that NRF and ShopperTrak are so widely disparate confirms for us at least one of their methodologies are suspect. In my opinion, both are mostly meaningless.

Here is my challenge to the CEOs of the National Retail Federation and ShopperTrak: $1,000 to the charity of the winners choice that your forecasts for Black Friday, the Thanksgiving weekend and the entire holiday shopping season are wildly off. I bet you your forecasts miss the mark by at least 10%-20% (though I believe its closer to 40-50%).

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Previously:

More To Holiday Sales Than A Few Phone Calls (November 28th, 2005)

There They Go Again: NRF Redux (July 28th, 2006)

More Bad Data from the NRF? (November 2006)

Repeat After Me: Spending Surveys Are Meaningless (October 2007)

How Good Were Holiday Sales Really? (January 10th, 2008)

Spinning Black Friday Retail Sales (December 1st, 2008)

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

We Don’t Know How Black Friday Sales Were Yet (November 28th, 2009)

In Stock! Bad Holiday Sales Forecasts (November 30th, 2009)

Isabel Cavill, an analyst at Planet Retail, talks about the outlook for consumer spending and online retailers including Amazon.com Inc. She speaks with Francine Lacqua on Bloomberg Television’s “Countdown.”

Bloomberg, Nov. 24

In light of Groupon’s IPO, have a look at this cool graphic from BuySellAds:

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Thanks, Scott!

Click to enlarge graphic:

Source:
How Much Money Will Consumers Spend This Holiday Season?
Mashable, November 1, 2011

Interesting chart showing a breakdown of where the family budget goues:

via infographiclist

Declining sales and new emission standards forced Mazda to finally pull the plug on the RX-8, the last of its rotary engine sports cars.

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Here’s Motorward:

The production of this car has been canceled back in July, and the remaining cars will be sold before the year end, and then the RX-8 will be gone forever. Currently there is no plan to make another rotary-engined car because, to put its simply, it’s not worth the hassle.

As a true successor to the amazing RX-7, the RX-8 featured a 1.3 liter rotary engine with an output of 232 hp, which is amazing for such an small size. At $28,000, the R-8 was one of the most affordable, and one of the most desirable, sportscar. Other great feature of it was the unique rear doors, which gave it the looks of a cool coupe, but practicality of a four-door car.

I had an RX8 about 5 years ago — the car was quirky, surprisingly exotic for a $30k — it didn’t start well cold, occasionally had some problems with flooding engine, and IMO, was underpowered by 50-10HP — but overall was terrific a well balanced car, with great steering and handling, good looks, and was a very tossable sport car.

Here’s what I wrote about the car in 2004

It takes a bit of experience with the Renesis engine to wring out the full power band — once you learn how, its a sheer delight. Yes, off the line the car is no match for big V8s. The torque is light at the low end — but it comes on strong once the tach swings past 5,000. From there, it kicks you back into the seat as it revs towards the 9,000 RPM red line. 0-60 in under 6 seconds is very respectable — but I’ll bet it beats many big blocks in the 30-70mph sprint.

My only complaint about the car — accurately described as a practical sports car — is the  lack of a 2 driver memory. If you build the car for practicality, as Mazda did, they should assume there will be more than one RX8 driver per household. Adjusting the side view mirrors and seats each and everytime me or the wife gets behind the wheel is a bit of a pain. Considering that the car has nearly every imaginable electronic gizmo — Navigation, heated seats, heated sideview mirrors, Xenon headlights, auto dim rear mirror, multi garage opener — it makes little sense not to offer the memory setting as an option.

By the way, if you are not taking the car from dealer stock (we got our 2004 at a year end sale), then order the  indash multi disc CD player. You’ll have less stuff lying around the door pockets.
(prior comments here and here).

There are a few 100 units left — go see if you can buy one at a deep discount…

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Source:
Mazda RX-8 Bites The Dust
Motor Ward, August 23,2011

Amazon.com’s stock-market value exceeded $100 billion yesterday for the first time, and anyone looking at how closely the world’s largest online retailer has tracked Apple Inc. might have predicted as much.

The chart above shows the market capitalization of the two companies during the past five years. Amazon.com’s value jumped ninefold in the period as Apple’s rose more than sixfold, (data compiled by Bloomberg).

Source:
David Wilson
Bloomberg News, July 28, 2011

Bloomberg television ran a brief segment in which they posited that Best Buy (BBY) has effectively become Amazon’s (AMZN) biatch.  And I think there’s some truth to that.  This is no doubt one of the consequences of a population that walks around with smartphones running barcode scanning applications that allow us to see, touch, examine, try out a potential purchase and then, if it is to our liking, immediately search the web to find its best price — possibly (probably?) elsewhere, and maybe even order it before we leave the site at which we went to go see it in the first place.  Unless it’s an impulse buy — walk in for a $12 thumb drive, walk out with a $700, 50″ flat panel? — why wouldn’t you:

1. Pay a lower price
2. Pay no tax
3. Probably get free shipping
4. Have your purchase in just 2-3 days

And the proof of the pudding seems to be in the performance:

I’d postulate this trend is a contributing factor to this news item about weaker BBY sales in general, but which contained this interesting tidbit (I’d guess the sale of mobile devices has a much higher immediate, on-site close rate than, say, digital cameras or other higher-end electronics) :

The chain is also pushing hard to open smaller stores. The company is opening 150 smaller-format mobile only stores by the end of the year, nearly doubling its total to 325.

“We are exploring and redefining what the optimal big-box footprint is for us,” CEO Brian Dunn said on a call with analysts.

And yes, I’m aware of Amazon’s far more diverse offerings — consider this post as applicable only to electronics.

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BR adds: I have been playing with the Amazon PriceCheck barcode scanning app — it spells the end of retailing as we previously knew it . . .

Even more holiday chart porn, via Daily Infographic:

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click for ginormous infographic:

Leading into the holiday period, the data — and by data, I refer to actual sales numbers, and not surveys, gut feelings or instincts — was strongly suggesting that the 2010 orgy of consumerism known as the holiday shopping season was likely to be stronger than expected.

The first clue I had of this was the Amazon sales from TBP. The embedded code of each link allows me to track click-throughs and purchases. All year long, it has been running significantly higher than 2009. (I’ll post some charts later this week).

Of course, plenty of people were stuck looking backwards. They gave tortured reasons as why this was not going to be a decent season. Call it a classic case of confirmation bias, these were the folks who simply refuse to acknowledge any improvements in the economy. These analysts seem to be shell shocked from the collapse; you should feel free to to do what you like, but once I recognize someone is caught in a negative loop, I tend to avoid their work until they prove they have some objectivity.

Why were the improved sales not a surprise to those people paying attention to the data? The negatives — weak job gains, housing overhang, consumer deleveraging, terrible municipal finances — were already well known all year. Even Oil over $90 was a not a big deal — it seems to have been in the $75-85 range for so long that gasoline over $3 had little shock value.

The newest data included more positives: Improving job market, equity gains, and an upcoming two percentage-point cut FICA payroll tax holiday in 2011. The 90.2% of the workforce that have jobs feel more secure (if they didn’t get laid off by now, they probably won’t). There is also a sense of widespread Recession fatigue; people are tired of living in bunkers, and are coming out to play again.

Lets consider the actual data, and what it might mean going forward:

• U.S. retailers’ 2010 holiday sales (excluding automobiles) jumped 5.5% — the best performance in five years, versus 4.1% in 2009 and down 6.1% in 2008

• Total holiday sales were $584 billion from Nov. 5 through Dec. 24, with notable increases starting as early as the second week of November

• Online seasonal sales up 15.4%; This is against an ongoing rise in online sales

• Apparel grew 11.2% over 2009 (-0.4%), with Menswear up 10.5%, and Women’s Apparel plus 5.6%

• Electronics lagged in dollar terms, growing 1.2% vs a 4.6% decline in 2009. Declining flat panel TV prices is a suspect

• Furniture sales were plus 3.8% vs minus 2.2% in 2009.

• Jewelry gained 8.4%

• Luxury (ex-Jewelry) grew 6.7% versus falling 0.9% last year.

Two last interesting datapoints worth mentioning:

Via the WSJ: 2010 consumer spending was 68.6% of the economy. This reflects an increase — yes, an increase –  from 66.5% in 2007. The reasons are 1) A sharp decrease in businesses spending; 2) The ongoing contraction of housing within the overall economy — currently at its lowest level since World War II.

Last, the US still has too large of a retail footprint — 40 square feet of retail space for each person; that is the most per person in the world. As I first noted in several speeches back in 2008, that needs to come down appreciably.

All told, a pleasant improvement over prior years . . .

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Previously:
Anecdotal Evidence: Shoppers Out in Full Force (November 21st, 2010)

Improving Holiday Sales Reflect Economic Recovery (November 29th, 2010)

Source:
SpendingPulse 2010 Holiday Wrap-Up Report
MasterCard Advisors’ SpendingPulse, December 27, 2010
http://www.mastercardadvisors.com/us/advisors/en/news_center/newsroom_detail.html?newsId=1323