Monday, December 28, 2009

Holiday Retail Sales Fantasies

The stock market had an early boost from a report on Bloomberg News issued by an affiliate of Mastercard that holiday retail sales were estimated to be up 3.6% vs. last year.  After adjusting for the extra day between Thanksgiving and Christmas this year, implied sales would be up 1% vs. a year earlier.

To be blunt, I will say that Mastercard's projection is b.s.  But that's just me.  Here's what Howard Davidowitz, a leading expert on the retail industry has to say:  "the consumer is in the tank!" Please watch the interview below of the always lively and engaging Davidowitz from this morning - here are his key points:

- up 3.6% - "if it's real, and of course I don't believe it is" -  is really 1% after you account for the extra day this year

- 60-70% of all same-store sales will be negative, leading Davidowitz to forecast sales to actually be down 1% this holiday season

- online slaes have been very strong this year but are only 4% of retail sales

- mall-based retail/dept store stores lost market share to the discount chains

Not surprisingly, I agree with everything Davidowitz has to say. There is just no way in hell the consumer would be spending more this year, given that unemployment is over 3% higher than last year, the consumer has significantly less access to credit and home equity wealth is trillions lower this year.

Anectdotally, I don't know anyone who did not cut back on gift-giving this year. Furthermore, the huge snowstorm that paralyzed the northeast right before Christmas had to have devastated mall-based sales, even if it had the effect of increasing online sales.

We all know how Wall Street and the Government manipulate and "adjust" numbers. We'll have a much better feel for what really happened between Turkey Day and X-mas on January 7th, when retailers report December sales.  I also expect to see several large retailers file bankruptcy or announce restructurings of some kind, including another round of massive layoffs, during the first quarter of 2010. Zales - the nations largest jewelry retailer - kicked things off over the weekend by announcing that they had hired an finacial advisor to explore restructuring options.


  1. One other issue (at least): I think gasoline sales are included in retail sales (who the heck knows now when the govt sticks its arbitrary finger in so much). Gasoline last December was (unleaded contract) just over a dollar while this year just under $2.

  2. Of course retail sales were up 3.6% just as the third quarter GDP was up 3.5%. I mean, who believes this BS? Only people who follow the mainstream media whose only purpose these days is to broadcast the official, status quo information. Newspapers and magazines used to be professional, nowadays the only way to get the real news is to read it from blogs (like this one). If one looks at the 3.6 figure, the only logical conclusion is that credit card transactions were up, which doesn't necessarily mean that retail sales in whole were up.

  3. I, too was surprised to hear the 'news', given what I have experienced in my town and in my travels.

    This dates from a week before Christmas:

    We spent significantly less, not (thankfully) due to unemployment, but to the fact that we want to hang on to cash, pay down debt more quickly, etc. I can't imagine we were alone.

    It was our best Christmas ever, hands down. Ditto for the rest of the family.

    The discounts were applied early by the retailers, and I didn't see anything go out of stock anywhere.

    Again, my views are ground-level, but I do know something of the retail world.

    It could have been much worse, but it was still a pretty tough environment.

  4. But the housing market is doing better! Maybe they're spending less on gifts because they're all buying homes now.