Retail: Here Come the Holidays

 

Here are some considerations headed into sales day tomorrow…

 

Let’s review the setup from a Macro level:

  1. While consumer confidence now starts with a 3-handle amongst a myriad of other reasons for concern from a Macro perspective, the consumer still appears willing to spend due in part to a notable drawdown in the collective savings rate to 3.6% in September from 4.5% in August. (positive near-term, negative long-term)
  2. Gross Personal Income compares are tough this month – as we’re going up against +4.0% compared to a previous run rate of about +3.3%. (negative point)
  3. The two main levers that account for the delta between Gross Income and Personal Consumption have offset each other for the most part.
    1. The consolidated personal tax rate is now at 10.9% vs. 9.5% this time last year. (negative point)
    2. The personal savings rate is now down to +3.6% compared to +5.4%.
    3. While both the absolute and yy change in unemployment has remained relatively stable at 9.1%, real wage growth has declined at a faster rate over the last two months through September down nearly 2%. (negative point)

    4. In looking at ‘Essential Spending’ (food, energy, healthcare), since decelerating to +2.9% in June it has increased every month since to +4.1%. (negative point)

    5. The balance of spending goes into the ‘Discretionary Spending’ line, which stood at +6.4% this time last year compared to +4.9% in September.
    6. In addition, consumer confidence is now at 39.8 compared to 49.9 last year.
    7. Based on our read out of POS data (NPD & SportScan), sales in October have increased sequentially from September in the department channel while weekly ICSC retail sales have held steady – one of the few positive deltas in the month. Though hardly representative of retail in aggregate, both athletic footwear and apparel decelerated sequentially as the month progressed.

The bottom-line is that we still think that there will be an increased bifurcation between upward and downward revisions in retail over the next quarter, and throughout 2012. During the month, we saw a few more retailers (CROX and CWTR) pre-announce lower while better positioned companies and retailers at the higher end continue to post strong results. While spending particularly at the higher end continues to remain healthy, the reduction in the personal savings rate remains one of the few levers left for the consumer to pull placing us in an increasingly precarious position heading into the 1H of F12. With prices at low-to-mid tier retailers not sticking, we would avoid exposure to what is becoming an increasingly more competitive battlefront in the domestic mid-tier market.

 

 

Casey Flavin

Director

 

Retail: Here Come the Holidays - SSS Mo Seasonality 11 11

 

Retail: Here Come the Holidays - SSS CIS Table 11 1 11

 

Retail: Here Come the Holidays - retail sales  comps  PCE 10 31 11

 

Retail: Here Come the Holidays - unemployment 10 31 11

 

Retail: Here Come the Holidays - yy chg unemploy by education 10 31 11

 

Retail: Here Come the Holidays - FW and APP 10 31 11

 

Retail: Here Come the Holidays - CPI less impoat 10 31 11

 

Retail: Here Come the Holidays - TEU vs Retail 10 31 11

 

Retail: Here Come the Holidays - oct SSS preview 10 31 11

 

 

 


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more