Posted on Monday, November 28th, 2011 | In Current Market News, Exchange Traded Funds
Financial Armageddon: In “Not So Good,” I argued that the euphoria over this past weekend’s alleged consumer spendfest was unwarranted because retailers’ profits almost certainly did not keep pace with sales. But there are other things to consider, including the likelihood that the latter did not actually increase as much as claimed, as The Big Picture notes in “No, Black Friday Sales Were Not Up 16% (not even 6%)”:
Let’s start with this whopper from an utterly breathless press release from the National Retail Federation:
“U.S. retail sales during Thanksgiving weekend climbed 16 percent to a record as shoppers flocked to stores earlier and spent more, according to the National Retail Federation.
Sales totaled $52.4 billion, and the average shopper spent $398.62 during the holiday weekend, up from $365.34 a year earlier, the Washington-based trade group said in a statement today, citing a survey conducted by BIGresearch. More than a third of that — an average of $150.53 — was spent online.”
No, retail sales did not climb 16%. Surveys where people forecast their own future spending are, as we have seen repeatedly in the past, pretty much worthless.
We actually have no idea just yet as to whether, and exactly how much, sales climbed. The data simply is not in yet. The most you can accurately say is according to some foot traffic measurements, more people appeared to be in stores on Black Friday 2011 than in 2010.
Another absurd example: Does any one actually believe “nearly one-quarter (24.4%) of Black Friday shoppers were at the stores by midnight on Black Friday”? Perhaps the NRF competing with the NAR for title of most ridiculous trade group.
Next up is ShopperTrak, who claimed a 6.6% gain in sales:
“Shoppers packed stores and spent money in record numbers on Black Friday, early surveys show, a phenomenon that analysts call a hopeful sign for the U.S economy after months of up-and-down consumer spending.
Black Friday sales were up 6.6 percent over last year and foot traffic in stores was up 5.1 percent, according to ShopperTrak, a Chicago-based research firm. The year-to-year spending increase was the greatest since 2007, the firm reported . . .”
What is the basis of that 6.6% gain? ShopperTrak “uses equipment installed in stores to measure traffic.” But that does not measure changes in window shoppers vs buyers from year to year, how much money and or credit people have, how large their holiday budgets are, or how much they are willing to spend. It is a very poor system for forecasting actual sales.
Then there is the distinct possibility that the Thanksgiving “splurge” might well have been the best we can hope for as far as the 2011 holiday selling season is concerned, if the following Oakland Tribune report, “California Ports Slump Ahead of Holiday Shopping Season,” is any guide:
The Port of Oakland and other California ports have suffered a slump in volume in recent months — an unsettling sign that could portend sluggish sales ahead of the crucial holiday shopping season.
The slowdown for imports suggests merchants curbed orders for overseas products due to fears of lackluster consumer demand. Despite reports of a busy Thanksgiving and Black Friday launch for Christmas sales, merchants may still have to grapple with feeble shopping activity in December.
At the ports of Oakland, Los Angeles and Long Beach, the year started out great. Month after month, volumes were up compared with the same month a year ago. Signs pointed to an improved economy. By midsummer, though, things began to go awry for the California ports as the volume of cargo began to sink.
“In January and February, we were up double digits,” said Isaac Kos-Read, director of external affairs with the Port of Oakland. “That might have been due to inventory restocking and the expectation of a big improvement in the economy.”
Whatever the reason for the surge early in the year, it didn’t last. “All the talk for several months has been potential double-dip recession, economic weakness, economic uncertainty, no further stimulus,” Kos-Read said. “Our imports are down, which would be a sign of weakness for the American economy.”
The slump arrived in August and continued through September and October.
“Those months are our peak season, the run-up before the holiday season,” said Lawrence Dunnigan, manager of business development with the Port of Oakland. “All of the imports are very soft this year.”
Finally, I really just how much extra discretionary spending we can expect to see at a time when 16 million children are living in poverty and no small number of Americans, as “60 Minutes” details in “Hard Times Generation: Families Living in Cars,” are having a hard time surviving at all.
Courtesy of Financial Armageddon
About John Nyaradi (http://www.wallstreetsectorselector.com)
John Nyaradi is Publisher of Wall Street Sector Selector: Your Home For ETF Investing! John writes a weekly guest column, John Nyaradi’s ETF Edge for MarketWatch.com and his investment articles have appeared in many online publications including Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, ETF Daily News, iStock Analyst , among many others. His book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs, is published by John Wiley and Sons and included among the Years Top Investment Books in the 2011 Stock Trader’s Almanac.