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.