Posts filed under “Retail”

Improving Holiday Sales Reflect Economic Recovery

The numbers are coming in, and so far, the Holiday shopping season is off to a very  respectable beginning. Mall Traffic, retail sales, even dollar volumes are all up. In some areas, improvements have been quite significant. Online sales saw very large gains.

We do notice a variety of contradictions, binary conundrums and footnotes. We know the consumer has been deleveraging, but they are also suffering from Recession fatigue. (We also know that deleveraging is partly due to increased defaults).

Luxe items and high end retailers saw a post-recession improvement long before department and electronics stores, but they too are improving. What this trend means for discounters like Wal-Mart (WMT) and Dollar Stores (FDO, DLTR) has yet to be determined. It would not be a surprise if they failed to keep up with non discount gainers, as our “Retail Slumming” concept of 2007 may be seeing a partial unwind.

The data is encouraging:

• Roughly 212 million shoppers visited a store or website over the weekend, an increase of 8.7% from last year, according to the National Retail Federation (WSJ)

• The average shopper spent $365.34, up 6.4% (WSJ)

• The heavy discounting and lower prices are holding down total retail sales spending in dollar total (AP)

• Black Friday weekend sales rise were estimated at 9.2% to $45 billion (NRF)

• Sales rose only slightly on Black Friday (ShopperTrak). This was attributed to a flurry of pre-Black Friday deals the preceding week

Online sales saw major gains. Part of this is the ongoing 15 year trend towards online retail; part of this reflects improving economic backdrop. The details:

• Sites saw spending up 9% to $648 million on Black Friday (comScore)

• Spending rose more than 14% from Thanksgiving Day through Saturday (IBM’s Coremetrics)

• For the first 26 days of November, online spending rose 13% to $11.64 billion vs 2009 (comScore)

• Thanksgiving Day e-commerce sales, typically a light day, rose to $407 million, up 28%

• ComScore is forecasting E-commerce sales in November and December to rise 11% to $32.4 billion. (Bloomberg)

This is encouraging, but incomplete. Retailers count on November and December for about 20% of their annual profits. Note that December 15-25 is believed to account for 40% percent of holiday business. Will consumers have the strength and the money to continue the momentum?

One last note: Most retail forecasts tend to be way too optimistic. We will find out if this is the year forecasters hit their marks.

>

Graphic courtesy of WSJ

Graphic courtesy of NYT

Category: Consumer Spending, Retail

Amazon to Apple: We Got Yer Beatles Right Here!

With Apple finally landing the Beatles for the iTunes Music store, I wondered if the competition was going to do anything in response. For example, at the iTunes Music store, the full Beatles Boxed set — obviously misnamed, as it is 1. digital and b) minus the physical materials (which are terrific) — is priced…Read More

Category: Music, Retail

Anecdotal Evidence: Shoppers Out in Full Force

As much as I loathe anecdotal evidence, I was taken aback by the sheer insanity of the retailers this week before Thanksgiving weekend. Yesterday, I ran a few errands, and it was fairly insane. Black Friday is a full 7 days away, and the parking lots were nothing short of madness. All the usual caveats…Read More

Category: Consumer Spending, Retail

Inflation? Not According to a Billion Prices

> Those of you who regularly complain/mock/kvetch about the BLS methodology for measuring CPI prices — and I am as guilty as anyone else — should check out the “Billion Prices Project @ MIT.” The idea behind the Billion Prices Project is that we can track inflation by collecting prices from hundreds of online retailers…Read More

Category: Data Analysis, Inflation, Retail

Retailers Need a Fresh Start

Retailers need a fresh start Andy Xie Caixin Online Aug. 30, 2010 > BEIJING: China’s gross domestic product surpassed Japan in the second quarter of 2010. The international media gave this milestone considerable attention. The domestic media hasn’t paid as much attention. As natural disasters, environmental degradation and property bubbles take the center of attention,…Read More

Category: Retail, Think Tank

“Pseudo-variety”: Soft Drink Industry Structure

Rather fascinating discussion of the beverage industry from Professor Philip H. Howard of Michigan State University. He concludes there is an oligolpoly, with 3 firms controlling nearly 90% of the beverage options. This lack of competition in this industry is obscured by the apparent variety of choices. Professor Howard calls it pseudovariety – variations on…Read More

Category: Consumer Spending, Retail

Tech Gadgets vs Durable Goods

Its the first Thursday of the month, so we will be getting monthly sales from many retail stores throughout today. Related to that, I am fascinated by this story in the WSJ. Durable Goods, Furniture, Apparel are out; In: Laptops, iPads, iPods; the staycation crowd are buying Blu-ray video players and big plasma screen televisions….Read More

Category: Consumer Spending, Retail, Technology

One Last Look at Mortgage Defaults Driving Retail Sales

Yet another case of anecdote trumping evidence: I am more than willing to entertain the possibility that squatters are a key component of this economic rebound, if only someone can show me some data that supports it. However, charts like the following, that calculate liabilities owed, are only half the equation: > 7+ Million Homeowners…Read More

Category: Credit, Real Estate, Retail

More on Mortgage Delinquencies & Retail Spending

The latest bad meme to develop legs is the idea that strategic mortgage defaults are goosing retail sales. We looked at this last week in Are Defaults Really Driving Retail Spending? as an idea driven mostly by anecdote (some quite ugly), but unsupported by any hard data.

To those pushing this idea, I ask this: Are these mortgage mod requests from egregiously irresponsible spendthrifts the exception, or the rule? And, if they are more than an exception, would you please produce actual data supporting this thesis?

After my post on this, I got dozens of emails with anecdotal stories of defaulting homeowners going on spending sprees. Many were so similar that I presumed they were email forwards from the same source. Also, Bill Gates wants to send me to Disneyland.

I started hunting for more info on this. I came across three items that are worth discussing. (if you know of any other data sources in this, feel free to mention in comments)

The first item was a quote from Mark Zandi in Monday’s WSJ:

How much can the world count on the U.S. consumer?

U.S. consumers remain the single largest source of global demand, even if their clout isn’t what it once was. J.P. Morgan estimates U.S. consumer spending will account for one-fourth of the global total in 2010, down from about 35% in 2003. Still, the global recession spread to Latin America and Asia when U.S. buyers put away their credit cards.

In recent months, U.S. consumer spending has turned upward and may continue that way for some time, says Economy.com economist Mark Zandi, who figures pent up demand will boost car and home sales. But the long-term outlook is hardly solid. Part of the reason for Mr. Zandi’s short-term bullishness is that he figures about five million households aren’t making payments on their mortgages, giving them as much as $60 billion to spend—for now. -WSJ

Zandi appears to have come up with his $60 billion figure (as far as I can tell) by taking 5 million delinquent home owners X a ballpark $1000 per month mortgage X 12 months = $60B.

Let’s take a closer look at Zandi’s analysis to see if it holds water.

- The March 2010 NFP report data had 15.0 million unemployed persons; the number of “long-term unemployed” rose to 6.5 million — 44.1% of total unemployed. An additional 9.1 million people working part time because full time work was unavailable.

Its reasonable to surmise that there is a huge overlap between the 24 million people either unemployed or under employed, and the 5 million foreclosures, and 6 million+ late mortgage payers. We can reasonably make a connection between a fall in income and foreclosures and defaults.

-Confusing cause and effect. Most people don’t default to get more money; they default because they have run out of money.

When your income plummets — in 15 million case above, by 100% — you stop spending except for necessities. The majority of hard working Americans who are unemployed (or under employed) and who are delinquent on their mortgages because they have run out of money. Merely failing to pay that liability, does not men you therefore have lots of extra cash burning a hole in your pocket.

- Therefore, Liabilities — what is owed by defaulting homeowners — are not the same as Disposable Income. Not paying that liability is not a windfall — its a sign of economic distress. That $60 billion is a collective measure of how much homeowners owe, not how much they have.

And this is coming from me, the guy who advocated that the economy needs more foreclosures . . .

The second item was from Minyanville’s James Kostohryz. He blamed the idea on Perma-Bears, stating they are “running out of excuses for why retail sales rose so strongly in March of 2010” (Are Mortgage Deadbeats Juicing Up the Economic Numbers?).

But James takes it a step further, crunching the numbers to determine, if true, how much this could be impacting spending. His conclusion? The most that strategic defaults are helping retail sales is about $228 million per month — “~0.026% of monthly Personal Consumption Expenditures (PCE) which are averaging about $863 billion per month.” Hardly enough to explain the significant uptick in retail sales.

Read More

Category: Analysts, Consumer Spending, Credit, Retail

Howard Davidowitz: Recovery? What Recovery?

The inimitable Howard Davidowitz on whether he has been completely wrong over the past year and whether America is in the midst of a glorious recovery:

Category: Retail, Video