It’s A Retail Sales Train Wreck

The Census Bureau reported that its advance estimates of retail sales for November show a .1% gain from October and a 3.8% gain over November 2015. Wall St. was forecasting a .4% gain. Oops. But there’s a bigger problem with that headline report of a .1% increase in retail sales for November:   it’s based on guesstimates by the Census Bureau for the largest retails sales categories.

If you go through the data tables that accompany the headline retails sales report – LINK – you’ll see asterisks in the “not adjusted” data for November in most of the business categories. In a footnote the CB discloses that, “Advance estimates are not available for this kind of business.”  Most people who see the headline news reports, or hear the news “soundbytes” on tv, do not realize that the retail  sales number is an “estimate.”

On an inflation-adjusted basis, the .1% “gain” reported for November is a decline.  Most are not aware of that fact as well.  Also, the .8% gain reported for October was revised down to a .6% gain.  It is highly probable that November’s number will be revised to negative when December’s retail sales report hits in January.  But the revision for November is typically not reported at all.

According to a research piece published by Cowen & Co. on December 14th, mall traffic fell 6.4% in November from October and December month-to-date traffic was down 9.9%. Granted, there’s no question that some portion of that mall traffic has shifted to buying online for its holiday purchases. However, even with the growth in online retail sales, e-commerce accounts for less than 10% of total retail sales (the Census Bureau estimated e-commerce represented 7.7% of total sales in Q3 2016.

I have no doubt that the Government’s Census Bureau is going to put forth its best effort to manipulate the sales data it collects in order to present a positive light on December and holiday sales this year. However, the actual reports coming from the retailers themselves reflects a retail environment in which the stores are fiercely competing for a “shrinking pie” of consumer disposable income.

Restoration Hardware stock did an 18% cliff-dive two weeks ago when it reported its Q3 earnings.   Over the last six trading days, the XRT retail ETF is down 4.2%.  It was down every day last week despite the SPX and Dow hitting new all-time highs.

In the latest Short Seller’s Journal released Sunday evening, I dive into the retail sales numbers in-depth and present a lot more information which should satisfy proof of concept that this year’s holiday retails sales will be a complete disaster.  Note:  I have no doubt the Census Bureau and industry promotion organizations will manipulate the data for the holiday season in order to report positive sales results.  But the reality check will come from the companies themselves, which have a harder time faking the numbers.

I present several retail-related short ideas in the latest SSJ, including options trading suggestions.  On of the ideas is already down 1.3% today.  You can access these ideas plus in-depth data and analysis using this link:  Short Seller’s Journal.   SSJ is a monthly subscription.  New issues are published weekly and there’s no minimum time commitment.

4 thoughts on “It’s A Retail Sales Train Wreck

  1. A close friend of mine is in the food business and sells high end
    snacks. His stores are in major malls throughout the U.S.
    We were discussing the economy and I asked him how his business
    was doing this holiday season. He looked at me and said, down 8%
    verses last year for the same period. He added that it was the lack of
    traffic that was going thru the malls that was the major factor in his
    sales decline. I said, how can that be? The government claims that the
    economy was getting better.

  2. Sadly, the truth lying in plain sight of everyone will be overlooked as always with the MSM sticking to their improving economy narrative. If you are a trader, you can make 20-30% buying housing, retail and auto finance companies as they run up to unthinkable levels just on hope and hype. Who needs earnings when all you need is a narrative, eager chasers and programmed trading robots to take the market ever higher?

  3. I find your friends comments absolutely true. I goto my nearest and very big NJ mall which is to cover lot of people’s shopping in this area and I see so less people. I look at people’s hand and they don’t have shopping bags mostly just come to hang out. Retailers are selling things for so less now, today on 12/19/16, I saw abercrombie and fitch giving 50% off store wide on kids clothing. Usually in regular days I could not find parking in the mall’s parking but it was so easy and near to mall these days at the end of December near holidays. I sell electronics online and I see same products which were selling so good until November suddenly stop selling. These products were hot items, I specially go to mall to see what’s happening and the stores inside the mall are empty. I have a gut feeling that it’s a Trump effect. People are scared, they are uncertain, they are saving money out of fear. Now I understood why president Obama was keep laughing/smiling or joking at the press conference or at any event even though sometimes the foreign policy decisions were bad and things abroad were not looking right. He just wanted to make people safe and secure and wanted to tell people that everything is alright so they can go about their business as usual. He did not instill fear into the heart and mind of people I don’t know whether he should do it or not but economical it worked. Trump on the other hand playing the fear card to get elected and now people are so afraid or insulted they are saving money for the uncertain future. No one knows the future but its the leaders job to maintain the world order plus running the economy efficiently. I think people wants to know how will trump runs the country. It looks like people who elected him are also afraid. African Americans are big spenders in USA and I was in UK and saw and heard from people too. Because of trumps racist remarks I think African American are also not spending much. Maybe it’s fear, uncertainty or anger people are not comfortable. It’s the longest December I had and can’t wait to trump take oath and start governing. hopefully he unites the country.

  4. was in Costco the other day and was surprised to see large blocks of the upper racks empty. I hadn’t seen this before. Also noticed a lot of half pallets. It was a little eerie.

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