Just about everybody is trying to figure out how such a big Retail Sales reading on Friday could coincide with such lousy results from the public companies in the few days prior. I ranted about this, and other key issues, on Hedgeye’s The Macro Show on Friday. CLICK HERE to watch this clip.
There’s a few considerations…
1. Let’s not lose sight of the big picture. We have a $17.9 trillion economy. Personal consumption is $12.2 trillion, or 68%, and Retail Sales clocks in at ‘just’ $4.7 trillion (ex food). The category that missed so precipitously last week was apparel, footwear and accessories – represented by the Department Stores. This is about a $500bn category represented last week by companies that account for $80bn (or about 2.2% of Retail Sales ex Auto). If you add up the growth in 1Q for the Census Department Store group versus the actual numbers we have the pleasure of talking with management teams about, you’re looking at a decline of -3.6% and 3.9%, respectively. That’s actually fairly accurate.
2. One question we hear often is how Amazon is affecting these numbers. We’d answer that a few ways…
A. First of all, Amazon is a retailer too. It reports its data to the government the same way Build-a-Bear does.
B. People grossly OVERestimate the importance of Amazon. Sorry AMZN-lovers out there. But it’s true. Amazon’s US General Merchandise business is about $50bn. That’s a whopping 1% share of total retail (just over 2% if you factor in 3rd party sales). We’d need to see colossal swings in Amazon’s top line -- like sales growing 200% -- to have an affect on these numbers. But even then, it would just shift sales from one categorization to another, unless it actually created incremental demand and new consumer expenditures.
3. As such, e-commerce retail accounted for 32% of the 3.0% yy growth. Department stores only hurt it by 1.7% -- or 5 basis points.
