Retail Industry Trends

[HenryTo]

Retailiers already bracing for the worst. The $64 billion question is, as always, how bad will this get and how much of this has already been factored into retail stocks?
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Retail Holiday Season May Be Modest
Tuesday October 30, 5:15 pm ET
By Betsy Vereckey, AP Business Writer
Sluggish US Economy May Weigh on Holiday Sales for National Retailers

NEW YORK (AP) -- U.S. retailers are bracing for a difficult holiday season, some industry watchers say, as higher gas prices and a sluggish housing market are expected to continue crimping consumer spending.

At a conference on Tuesday hosted by the Retail Marketing Society, a membership-based organization focused on the retail industry, some industry executives said holiday sales may be sluggish.

"This holiday season will be somewhat Grinch-like," said Carl Steidtmann, chief economist at Deloitte Research.

Steidtmann said retailers are preparing for the worst, especially given tightening credit and problems in the housing market. Steidtmann said it will be at least 18 months to two years before the housing market bottoms.

Merrill Lynch analyst Jaime Sheinheit said higher energy costs will weigh on consumer spending, noting that retailers have had trouble getting customers in the door. However, it's hard to tell whether the sluggish traffic is related to softening consumer spending or warm weather, Sheinheit said.

"Cold weather may spark shopping," she said.

In the luxury sector, Sheinheit said handbag maker Coach Inc. has warned of sluggish traffic in its U.S. stores. The company recently issued a fiscal second-quarter same-store sales outlook it called "conservative." Same-store sales are sales at stores open at least a year, and the industry metric is considered a key barometer of a retailer's health.

David Wolfe, creative director at Doneger Group, a buying office, said Coach has reached its saturation point with aspirational customers, who may not have the money to spend on these handbags but still want quality at a price.

Meanwhile, wealthy customers may help other luxury retailers this season, like Tiffany & Co., as spending patterns among the affluent tend to stay the same, regardless of changes in the economy.

Sectors that might fare better include teen retailers, Sheinheit said, noting that the income of their main customer, teenagers, usually stays the same. Companies in this sector include American Eagle Outfitters Inc. and Abercrombie & Fitch Co.

One company that may emerge stronger, Sheinheit said, is AnnTaylor Stores Corp., which has leaner inventory and a new product assortment at its lower-priced Loft division. In August, the company said it increased markdowns to reduce inventory heading into fall seasons at both its Ann Taylor and Loft stores.

"There is a lot of opportunity for Loft to improve margins this holiday season," Sheinheit said. "As always, what it comes down to is having the right product."

[HenryTo]

November 2008 sales numbers. Sears actually doing relatively well:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUYE9gPMdo9k&refer=home

[rffrydr]

Howard Davidowitz, "The King of Retail":

http://media.bloomberg.com/bb/avfile/News/First_Word/vci.Au9_qUQs.mp3
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Today is the Tomorrow you worried about Yesterday!

[Rubedo]

http://www.ritholtz.com/blog/2008/12/spinning-black-friday-retail-sales/

Spinning Black Friday Retail Sales

By Barry Ritholtz - December 1st, 2008, 7:11AM

A few things you can count on every year around this time:

1. Sales data for Black Friday will be touted by biased interest groups. They are invariably have an upside bias;
2. Headline writers will get it wrong
3. Survey data will be taken as the equivalent of actual sales;
4. Strong forecasts will be subsequently proven wrong;

Such is the current situation with the Black Friday sales data, with reports still trickling in from around the country.

The WSJ goes for a hat trick of errors, starting with this article’s headline:

• Holiday Shopping Off to Strong Start

What’s wrong with this? First, as opposed to actual sales data, they rely on a “survey of 3,370 shoppers, the National Retail Federation estimated shoppers spent an average of $372.57 over the weekend, up 7.2% over last year’s $347.55.” The National Retail Federation is hardly the objective group you want crafting (or hiring 3rd parties to create) survey questions; 2nd, we know that humans are terrible at forecasting their own behaviors. Historically, their projections have had little correlation with their actual spending patterns. And third, the headline is belied by the details contained in the article. (MarketWatch was no better)

The NYT did no better. They wrote (Deep Discounts Draw Shoppers, but Not Profits):

“The National Retail Federation, adding up sales Thursday through Saturday and projected sales for Sunday, said that each shopper spent about 7 percent more this year than last year. Shoppers spent an average of $372.57 Friday though Sunday, according to the federation, a trade group”

No, the NRF did not “add up sales.” They added up self-reported answers to survey questions. As we have seen over the past few years, there is a world of difference between the two.

One of the better data sources of what the retail season might look like comes from Comscore, which tracks actual online retail sales.

“ComScore on Sunday reported that online, nontravel retail sales on the Friday after Thanksgiving, traditionally a big day for consumer spending, reached $534 million. That’s up from the same day a year ago, but just barely–online retail sales rose just 1 percent, from $531 million…

But for the four weeks of November through Friday the 28th, retail e-commerce dropped to $10.4 billion, down 4 percent from $10.8 billion for the same period in 2007, according to ComScore. For the full holiday season, even Friday’s slight gain may look good. ComScore predicted that for November and December, online sales will be flat compared with 2007, coming in again at $29.2 billion.”

Bloomberg also got it wrong, but at least provided some context:

“U.S. shoppers, lured by discounts of as much as 70 percent, came out in greater numbers than expected and spent more this holiday weekend than last year, though those figures may not foreshadow a stronger holiday season.

The National Retail Federation, AN INTEREST GROUP FOR RETAILERS AND SHOPPING MALLS, said 172 million shoppers went to stores and Web sites, a 17 percent increase from a year ago and more than a forecast of 128 million. SHOPPERS SAID THAT they spent an average of $372.57, up 7.2 percent from last year, according to an e-mailed survey conducted for the NRF by BIGresearch, a Worthington, Ohio-based polling firm. SHOPPER SURVEYS HAVE A TRACK RECORD OF BEING UNRELIABLE FORECASTORS OF BEHAVIOR.

The early turnout may not be enough to overcome consumers’ reluctance to spend as they cope with climbing unemployment and housing costs and shrinking values in their stock holdings. The NRF said its forecast remains that holiday sales will rise 2.2 percent to $470.4 billion, the slowest growth in six years.” (My edits are ALL CAPS)

In an ideal media world, Bloomberg would strike nearly all of the middle paragraph. Alternatively, they could add information explaining that the NRF is a PR group for retailers, and that their surveys have not been historically accurate forecasts of actual spending.

Later this week, we should get Master Card’s ShopperPulse data. It is the actual measurement of what people spent (via their MC Credit Card) and has proven to be more reliable than either foot traffic, surveys and other biased sources.

To get a better view of this year’s holiday spending, back out the fuel purchases (whivhmay appear depressed due to less usage and lower prices). You also need to adjust for some of the gains in online sales, which are likely to be up 20% as part of a secular trend towards online shopping, not increased retail sales.

[Rubedo]

http://www.marketwatch.com/news/story/Black-Friday-e-commerce-spending/story.aspx?guid=%7BF1F02DD8%2D86E7%2D430E%2DB1B4%2D0ED1A0BE0AC9%7D

Black Friday e-commerce spending edges up 1%
But ComScore report shows overall holiday sales down so far this year
By Michael Kitchen, MarketWatch
Last update: 3:27 p.m. EST Nov. 30, 2008
NEW YORK (MarketWatch) -- Black Friday, the traditional start of the holiday shopping season, saw a 1% gain in online shopping from last year, even as broader seasonal sales are trending toward a decline, according to digital marketing analyst firm ComScore.
This year's Black Friday saw $534 million in online spending, ComScore said. Online sales for Thanksgiving Day, meanwhile, totaled $288 million, a 6% rise over 2007's results.
However, the survey added that for the holiday season to date -- which ComScore said covered Nov. 1 through Nov. 28 -- only $10.41 billion had been spent online, marking a 4% decline versus the equivalent days last year.
"Early reports suggest that Black Friday sales in retail stores were slightly better than anticipated in this depressed retail climate, and that performance apparently extended to the online channel, which saw sales on Thanksgiving Day and Black Friday combined increase 2% versus year ago," said ComScore Chairman Gian Fulgoni.
Data released Saturday from ShopperTrak RCT Corp. said that Black Friday sales at physical stores rose 3% from last year. See full story.
"It's probable that on Black Friday consumers responded positively to the very aggressive promotions and discounts being offered in retail stores, so it will be important to see how they respond to similarly attractive deals being offered online on Cyber Monday, the traditional kick-off to the online holiday shopping season," Fulgoni said.
Black Friday refers to the day after Thanksgiving, so called because many retailers begin to turn a profit on that day, moving from "red ink" to "black ink." Sales for the day are seen as a key harbinger for the overall holiday season.
Cyber Monday, a more recent invention, is the Monday following Thanksgiving and serves as the online equivalent to Black Friday. The idea is that many shoppers will wait until they are back at their offices after the holiday in order to make their Internet purchases using faster computers available at work. While the advent of rapid home-based Internet connections has made consumers less likely to shop from their offices, the day is still seen as a retail bellwether. End of Story

[HenryTo]

Latest retail sales for "Black Friday" are pretty decent - especially in light of the fact that some retailers started early by staying open on Thanksgiving Day (Thursday):

http://www.bloomberg.com/apps/news?pid=20601087&sid=arRTxyMCNil4&refer=home

We were at the Century City Mall yesterday at 3pm PST and it was totally packed. May again scout out the malls today to get a sense of what folks are buying.

[rffrydr]

So. Cal kicks it off with a BANG:

http://www.marketwatch.com/news/story/two-killed-calif-toys-r/story.aspx?guid=%7B622FCF6A-2C2B-4CFB-AE07-7F9FE4BF4F04%7D

The agressiveness at this grand shopping event belies perhaps the lack of money there is to shop with. Like a muscle, the reflex is still there.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Hello savings culture! Thanks OPEC. Of all people you should know the parable of the straw and the camel:

http://www.nytimes.com/2008/11/29/business/29charts.html?ref=business
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Perfect 22 year record. Can it hold?

[rffrydr]

Worst sales stats "in history.":

http://biz.yahoo.com/ap/081114/economy.html


OD, do you have any anecdotal recollections of the great renouncing of credit (card) debt under Carter--when rejecting credit became a patriotic duty? It didn't last. Was it just the freespending ways of the Boomers or was there something more specific to the turn you remember?
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Having "championed" the idea of an extended consumer-led recession this is not the wisest of predictions, but fools have much company these days. So here goes: the combined effects of gas, credit and politics will mark this quarter as the low point in actual auto sales.

http://detnews.com/apps/pbcs.dll/article?AID=/20081103/AUTO01/811030413

Caught in the pincers of 4.27/gallon ave. gas; 700plus credit qualifying; unwanted trade-ins; the slow twist of lease payments, collapsing savings, and a mindset of nothing-less-than the reinvention of the automobile ... but that's the beginning of the difference.

This economy is already lean and mean. That is the legacy of the Millenial top. Tech and a repositioning in manufacturing to a "platform" model will insulate job losses on the downside. Watch out china. And since we live and breathe credit, a world without it cannot be contemplated. That means it won't happen. The lease to over-reach may be over but the world remains a buyer for those returns. Meanwhile my aunt fills up premium today at 2.11/gal and the minivan can stand only so much abuse from the kids. Cars break. The fleet is held longer now (trucks age more favorably, which was part of their attraction) but the impulse to trade-in was strong already a year ago. This will build. And, in the heartland, this is a nation that will sell its soul for a truck.

As a backdrop. The necessary infrastructure spending likely the focus of increased fiscal policy will carry the great american truck right along with it. The farmer and oilman, the wealth among us, will also be supportive. This, of course, favors Detroit.

60% of consumer spending is by the top eschelon of earners. That takes out the DB7s and Masserattis. But with these kind of price points and breaks on imputs those that can, will. And those that can will remain much more than say the 82 recession when jobs were the target.

Projections at sub '93 levels cannot be maintained if only on the basis of population and relative currency weakness. We've got commodity producers on either side. It's the first thing an immigrant wants (look for more of these back from india, china etc).

New models are coming at a terrific pace, set for full electrics in a year and a half. A new President brings new hope and new confidence. Look for the press to start talking "peace dividends" soon. Look for Iran to deliver it--of necessity.

More's to be said but suffice it to say that the "mark-to-market" is in. Unlike stocks and bonds the family car has a tangible value--and can be moved from home to apt.? Look for "savings" to yet again be transmorgified into spending in some new twist. A simple leveling off will do much for this series. Big screen TVs may come and go but the american car is here stay.

Let's see.

http://www.marketwatch.com/news/story/goodyear-revenue-growth-bucks-weak/story.aspx?guid=%7B9BDBC3D2-3699-4C79-B6D2-403AA2C246C5%7D&dist=msr_44[/url]
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Oops...meant billion; equal to TARP:

http://media.bloomberg.com/bb/avfile/Economics/On_Economy/v0YE7B3GeRuc.mp3

This is getting surprising short shrift among other economists--who are thinking bounce back to 90-100 range. 50 is a real game changer--with the added bonus that it might bring peace to the Middle East

No more financing of Hezbollah et. al. via Iran...perhaps.

Airlines, as expected however, are full of hedges over $100 which have to be accounted for immediately. Apparently their hoping for a rally so they don't look so bad. Southwest is the lowest at $62.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Quick "back of the envelope calculation":

The US imports about 10 million barrels/day of crude oil and about 13 million barrels in total hyrdocarbon liquids:

http://tonto.eia.doe.gov/dnav/pet/pet_move_imp_dc_NUS-Z00_mbblpd_a.htm

Simply taking the crude oil number, we know that for every $10 drop, this adds about $100mm a day to the domestic economy. On an annualized basis, this equates to $36.5 billion, or 0.27% of GDP or 0.40% of US consumer spending.

During the 3rd quarter, the spot price of crude oil averaged US$119. Since then, it has plunged to $64 a barrel. That equates to $55 a barrel, or an addition of $200.75 billion (1.5% of GDP, or 2.2% of consumer spending) to the domestic economy on an annualized basis. Assuming the ECB and the Bank of England cuts dramatically over the next few weeks, and assuming the USD weakens, a contraction of US GDP during the fourth quarter is not inevitable.

[rffrydr]

Heard a stat today: every $20 drop in crude is 700million to global economy.
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

The consumer engine is still running, although definitely not has strongly as this time last year. The rapid decline in energy and general commodity prices will help too - especially for the retailers that are left standing. Will be interesting to see how the "Halloween Hangover" pans out - and what the next Congress/Treasury is going to do about it.

[rffrydr]

It's not the worst...yet. Someone forgot Halloween--now that's discretionary.

http://www.latimes.com/business/la-fi-halloween25-2008oct25,0,5221041.story



Scaring up a profit


"For some reason, I'm going all out this year," said Kurtz, a voice-over actress from Studio City who planned to spend $500 on the holiday, up from $100 last year. "I don't know -- I'm just having a really fun time and all my friends are doing it too. Anything is a good distraction from reality."
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Today is the Tomorrow you worried about Yesterday!