I’m off to Bloomberg TV from 10:40am or so. We will be discussing all of the recent Retail Data, and its impact on the Markets and the Fed. If you are not near a TV, you can stream it here: http://www.bloomberg.com/tvradio/tv/
We will be discussing the June Retail Sales Data, which were released earlier today — and it stunk up the joint. Some Details via Rex Nutting at Marketwatch:
-Auto sales fell 2.9% in June after a 1.1% gain in May. Excluding auto
sales, retail sales fell 0.4%, compared with expectations of a gain of
0.2%;-Excluding autos and gasoline, sales fell 0.3%, the biggest decline in three years;-Demand for other durable goods was also very weak, showing the impact
of the housing slowdown. Sales of furniture fell 3%, the biggest drop
in four years. Sales of electronics and appliances fell 1.4%. Sales of
building materials fell 2.3%;-Sales of nondurable goods were mixed. Sales at clothing stores fell 1.4%, but sales at most other kinds of stores rose;-Sales at general merchandise stores rose 0.3%, despite being held back by a 1% drop in department store sales;-Sales at health and personal care stores rose 1.2%;-Sales at food and beverage stores rose 0.4%. Sales at restaurants and bars rose 0.1%;-Sales at nonstore retailers, such as catalogs and online stores, rose 1.2%;-Sales at sporting goods, music, books and hobby stores rose 0.4%.
This was no surprise after The International Council of Shopping
Centers (ICSC) reported that June 2007 sales decelerated from last year
– they expect increases of ~1.5% versus 3% in June 2006.
Note the difference between Food sellers and everyone else: The USDA
says milk prices increased 68% y/y in June. The DoE has gasoline prices
+28% y/y. Wal-Mart Press Release noted “As in the past four months of this fiscal
year, grocery sales continued to be stronger than general merchandise
during the June five-week period at the Wal-Mart Stores segment.”
Some specific company info worth observing:
-Costco slightly beat estimates by 0.1%, +6% with 5.9% expected
-Target, one the nation’ largest retailers, reported the expected 3.3% gain
-JC Penney reported a DECLINE of 1.5% but it was smaller than the expected decline of 3.1%
-Macy’s reported a decline more than the expected 1.7%
-Kohl’s reported a decline of -4.9%, which is much larger than the expected -2.3%
-GAP, one of the largest US clothing retailers, reported a decline of 5% (4.1% was expected)
-Ann Taylor reported an 8.4% decline; 5% was expected
-Limited Brands reported a 3% decline’ -3.1% was expected
-ANF reported a gain of 2% on aggressive discounting of lightweight items; a decline of 2.8% was expected
Should be fun . . .
Advance Monthly Sales for Retail and Food Services
Census Dept., June 2007
Retail sales fall 0.9%, largest drop since 2005
Tepid demand for durable goods and falling gas prices sink sales in June
MarketWatch, 9:16 AM ET Jul 13, 2007
U.S. Retail Sales Fell More Than Forecast in June
Bloomberg, July 13 2007
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
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.
Mrs. Big Picture is smart enough to know that when she wants to go
shopping, she best not call it that if she wants me to come along. So
the clever lass has taken to calling sport shopping "Economic Research."
I do this sort of "research" every week.
That’s why I laughed on Tuesday night, when Noah Blackstein busted my chops for shopping at Sears (I’ve been a Land’s End client for years). While I was there, I looked at appliances, lawn mowers, plasmas, and Levis. On a Saturday afternoon, tumbleweeds rolled by — the store was totally empty.
I have the same routine every time I visit a store: I look at the merchandise, see how well the store is stocked, merchandised, organized, cleaned, etc. Typical Peter Lynch stuff. I lurk around, watching other customers interact with store employees. I often buy something, if only to return it and see how the process is. (A pair of Levis went back to Sears 3X — they were defective and split in the wash).
Over the past month, I have been to the following stores:
Home Depot (HD)
Best Buy (BBY)
Circuit City (CC)
Ralph Lauren Polo (RL)
Smith & Wollensky (SWRG)
Saks Fifth Avenue (SKS)
Pottery Barn (WSM)
Williams Sonoma (WSM)
Lord & Taylor
Barneys (formerly BNNY)
That doesn’t count all the small mom and pop stores and restaurants.
Over that period, I purchased items at Home Depot and Lowes (all sorts of stuff), Fortunoffs, Target, Polo, Century 21 (my Ted Baker ties come from there as well as Saks and Ebay), Lord & Taylor, Amazon (books and DVDs/CDs), and an auto dealer (I used Swapalease.com to replace the wifes RX8). Oh, and I got a new keyboard at Apple.
I avoid Wal-Mart (WMT) in NY, as the stores are these horrific garish fluorescent nightmares. In California, where they seem to be open til midnight or even 24 hours, I have made emergency/lost luggage purchases at the only slightly less ugly versions. I cannot recall the last time I was in a K-Mart (SHLD), but many years ago they wrere the only big box retailer in the Hamptons/Riverhead.
Sandy in comments asks: Aside from Sears, how does everything else look?