Posts filed under “Retail”
Historically, consumer credit has roughly tracked overall changes in house prices. In other words, the consumers’ ability to borrow — and then go out and spend — has been highly correlated to real estate changes (and hence, the importance of interest rates).
In the attached chart, courtesy of Michael Panzner at Rabo Securities, the year-on-year changes in the U.S. Office of Federal Housing Enterprise Oversight’s quarterly house price index is overlayed on a graph of consumer credit outstanding as a percentage of nominal GDP.
In a healthy environment, you see real (after inflation) wages rise, and consumer spending going higher along with that.
In a stimulus-driven environment like we’ve enjoyed for the past three years, instead of real wage growth, there’s been a lot of consumer borrowing propelling their spending. I expect as the borrowing slows down, so too will the consumer spending.
I don’t see how to put a positive spin on that.
click for larger graph
Source: Mike Panzner, Rabo Securities
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: