Retail Sales: It’s Going To Be A Slaughter

The Goldman Sachs ICSC chain store sales plunged 6.3% for the week ending December 5 (measured through Saturday each week).  The index measures same-store sales for retail chains.   A small decline is expected, as this is the week that follows Black Friday week. But I pulled up the data from last year and the same metric declined only 1.8%.  And, in 2013 chain store comp sales actually rose 1.5% for the week following Black Friday week.

The economy is collapsing.  This is evident from the ongoing crash in commodities, especially the price of oil and natural gas.  The consumer is tapped out.   There’s a law of economics called the Law of Diminishing Returns.   It says that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Traditionally this law would apply to production and manufacturing.  But in an economy based on the digital printing press, this law applies to money printing and credit creation. At a certain point, the ability of money printing and credit creation reaches a limit at which it can no longer stimulate consumption.  Consumption of homes, cars and discretionary purchases.

Retail sales this holiday season will reflect this law as it applies to retail spending.   We’ve already seen credit card data from Bank of America that indicates a 10% drop in spending for the November holiday season for through the first three weeks.  Goldman’s chain store sales indicator reinforces this stunning fall-off in holiday spending.

Do not get fooled into thinking that online sales will make up for the big decline in brick and mortar store sales.  Online sales represent just 6% of total retail sales. Even if online sales tick up to 7 or 8% of total sales, the increase of a few $100 million million will barely dent the decline in total sales, which will be in the billions.

One more point, November retail sales are due out this Friday at 8:30 a.m. EST.  The data is compiled and constructed by the Census Bureau.  There is no doubt in my mind that they will do their best to manipulate the data into showing an unexpected gain.  Consider the source when you see the report.

Next up we will see the application of the Law of Diminishing Returns as it applies to auto and home sales.  The Government is already trying to defer the onset of this law in housing as it is now rolling negative down payment, low interest rate mortgages for people with low credit scores.  The “negative down payment” is derived from the fact that the homebuyer can borrow money from others to fund the 3% down payment OR take a loan from the community.   Sheer insanity.

12 thoughts on “Retail Sales: It’s Going To Be A Slaughter

    1. Thanks. Just scanned through the numbers. Unit sales growth is flat. All the revenue/income gain came from price increases – bubbly inflated price increases that will prove to be unsustainable.

  1. Yesterday HYG said “Look out below!”
    This morning it’s shouting “Run for your life!”

    The diminishing productive yield of debt. More in – less out.

    Looks like the ‘blood in the gutters’ has started in earnest. Like EU lawyers jumping out of windows in Brussels!

  2. Big trouble a brewing in downtown River City

    Yes Sir, those CMBS derivatives are about to blow! Commercial real estate is about to fall on it’s own greedy little sword. Kinda send shivers down the spines of those who own their retail outlets, doesn’t it? More abandoned malls coming soon to a city near you.

  3. We live in an economy which is utterly dependent on the marginal big-spending consumer: in his 20s or 30s, with a breadwinner job or credit, who will pay RETAIL prices for NEW goods, specifically highly-marketed & high-profit margin discretionary purchases…cars, home entertainment, clothing, eating out, tech.

    Problem is, there are fewer and fewer of this type. I shop around for cheaper vegetables and buy day-old food whenever available. Am I the future?

  4. This is just my own observation from World Cost Plus, but the shelves are packed and they are offering significant discounts on the holiday stuff, already. I’m seeing many things discounted by 50%, and I wouldn’t purchase anything that wasn’t marked down by 25% or through the use of a coupon.
    On a separate note, I’ve been able to pick up 7000 rounds of 22LR at decent prices through a variety of stores. Finally, worry-free plinking for a long time.

  5. Thanks Dave, Good stuff here and the Kinder Morgan. My Dad is way overexposed there and he will not sell…..He has rode the market up and now riding it down and downer. Swears he will not sell this cheap….oh well

    My focus is primarily supplying food products to the fast food and mid scale restaurant channels. I regularly compare notes with colleague’s and management of the companies I work for/with. Can tell you things got progressively uglier in Q3. Most noticeable in the mid scale i.e Chili’s, Applebee’s, to PF Changs and Bonefish Grill to name a few. While restaurants are full at peak times the evenings tail off quickly and discounting is getting real LOUD!

    For instance a recent trip to Costco uncovered $100 gift cards for Changs, Bonefish and Abuelo’s selling for $80. In addition Bonefish had just dropped a 20% off coupon in the local paper. My math shows going into eat there means you are starting off with a 36% discount if you do both…booze not included. Obviously the discounting in the Pizza biz is off the charts. Papa John’s will give you 50% off just about any day the week for a Basketball, Football, Hockey, teams IF THEY EVEN PLAY. Don’t even have to win. The whole train wreck is so overbuilt its got to be near some real ugly tipping points. A former employee of mine called this morning about to go ballistic on his latest insurance turd courtesy of O’Bammy care. His increase was 19.2%. He was wanting to compare notes. Told him mine just came thru at 18.7%. Not going to see much in the way of an increase in discretionary with that blowing it all up. Told him not to sweat it as the gubmint sez NO INFLATION.

    This whole thing is swirling, twisting and turning. I think even the financially ignorant you know the type their eyes glaze over when you mention the word Derivative, or ask about why gas is $1.60/gallon or why interest rates are 0%. Even they are beginning to figure out the jig is about UP!

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