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November 26, 2007
U.S. Holiday Sales: What Fools Believe
Given that many stores extended their hours of operation this year compared to last year, the 8.3% increase in ‘Black Friday’ retail sales reported by ShopperTrak was not surprising. Less surprising still was that when including Saturday the two-day retail sales tally over the weekend fell to an estimated +7.2% (if taken alone, Saturday was weaker on an apples-to-apples basis than the combined statistics suggest).
At risk of belaboring the point, the math works out as follows: Friday’s $10.3 billion in sales was 8.3% better than last years $9.51 billion, and Saturday’s $6.1 billion was approximately 5.79% higher than in 2006 (+7.2% combined). Unfortunately we do not know exactly how many extra hours stores were opened for on Friday compared to last year, and we have little insight into what role price cuts/retail market dollars played in the data. What we do know, is that more aggressive retail tactics seem to arrive every year and U.S. consumers nearly always respond positively to this trend. For the record, the National Retail Federation is looking for a 4.0% increase in Holiday sales this year, or the lowest year-over-year increase since 2002.
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Needless to say, celebrating the unsustainable trends in U.S. consumer spending is akin to blindly applauding the uptick in homeownership rates during the housing bubble years. To be sure, as U.S. consumer liabilities growth continues to outpace asset growth, it can be assured that this unsustainable trend will, one day, hit a wall. However, until this day arrives those that repeatedly cry wolf when it comes to U.S. consumer spending will continue to look foolish.
In short, there was the added expectation this year that with U.S. consumer sentiment and home prices sliding into the Holiday season that sales would disappoint. The limitations of the early data notwithstanding, sales are up! The wolf cries, at least for the moment, have faded into the silent nights, even as the ‘projected’* data is less convincing of a strong Holiday season...
* Spending data for Thursday, Friday, Saturday and projected spending for Sunday says that “consumers spent an average of $347.44, down 3.5 percent from last year”. NFR
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