Posts filed under “Retail”
One of the odder bits of analyses we have happened across over the holidays is this bit of explicative: “Of course employment has lagged prior recoveries, as we have been adding jobs from unusually high levels of employment.”
As you may have surmised, we find this explanation
wanting. First, it fails to address the issue of NILFs – the millions of people who are no longer in the Labor force (See Participation
Rate, 2000-2005). As we
have noted before, the basis for this is the false comparison with prior post
WWII recoveries, rather than post-Bubble
Second, it fails to recognize that across the
entire economy, the recovery has been sub-par. As the nearby chart reveals,
excepting Real Estate, all other areas show relative weakness to prior
recoveries, including GDP, Personal
Income, Consumption, Equipment and
Indeed, recent data has revealed several ominous
signs about the economy. The holiday shopping season was significantly
consensus. We also expect that prevalent deep
discounting will affect Retailer’s profit
margins; we interpret these data
points, combined with the generally weak December Retail, as proof
the consumer has finally started to tire. And, it has only begun to bite into
Also noteworthy is that even Real Estate has started to show
signs of distress. Inflation, driven primarily by overseas
commodity demand, remains robust, and the Fed can do little about it, short
of inducing a global slowdown. And as recent events in Nigeria and Iran have made all too clear, the world’s economy is hardly insulated from the impact of yet another energy shock.
Thus, it is against this backdrop that we begin what is likely to be the last earnings season of double digit growth. With 67 S&P members reporting this week, and nearly half – about 30 – in the financial sector, we will get an early read on
how the flattened and just inverted yield curve is impacting earnings of this key sector. We are expecting only a modest influence on
financials as of yet. The more pronounced effects may not be felt until later
Besides, the bulk of the S&P500 year-over-year
earnings gains have not been reliant on the financial sector. Instead, about
half of the gains have been a function of energy sector earnings. We can chalk
up about a third of the year-over-year
gains to the half a trillion dollars
in share buybacks last year. Thus, market gains remain perversely dependent
upon high energy prices and share repurchases – hardly the historic basis for
sustained performance . . .
Back on December 1, I mentioned that "Holiday sales increases can be in the 3 to 4% range." This modestly Bullish call was at the very low end of Wall Street projections.
The prime motivation for that range was the decreasing gasoline prices post Katrina, and the love affair with Plasma Screen TVs (that was the good news). Keeping the Bullishness modest was the negative real income for the middle class; on the other end, the increasing take home pay for the ultra wealthy supported the relative strength of the luxury retailer.
The WSJ reports that "overall, Retail Sales rose 3.2%." And, the big winners were the luxury stores. Its a pleasant surprise anytime projections like this end up that accurate.
I also wish to remind you (again) how the silly NRF projection of 22% was; Their absurdity was a statistical abomination (and they were chastised in this space for it)
Here’s the Journal’s summary:
Holiday shoppers spent big on a few products last month, but held out for last-minute deals, resulting in mixed performances from U.S. retailers. Cash registers rang at luxury retailers and teen specialty shops, but sales at Wal-Mart Stores Inc. disappointed.
Overall, sales at stores open at least a year, a measure known as same-store sales, rose 3.2% in December from a year earlier, according to an index of 66 chains compiled by the International Council of Shopping Centers. The trade group, based in New York, had expected same-stores sales growth between 3% and 3.5%. According to the tally, same-store sales at luxury stores grew 6.4%, while discounters ticked up just 2.6%.
"All combined it was good, not great," said Jeff Klinefelter, senior research analyst at Piper Jaffray. "When we finally got the last-minute rush, it was the higher-end consumer that followed through with spending."
Luxury Stores Were Holidays’ Stars
Overall Retail Sales Rose 3.2%, Slowed by Discounters; Holdout Shoppers Also Hurt
THE WALL STREET JOURNAL,January 6, 2006; Page A2
Mixed Stockings for Retailers
See the WSJ’s retailer chart here: