CHART OF THE DAY: Retail's Apocalypse Now

Now let’s actually look forward…that helps when it comes to making money.

1. Starting in August, we’re going against the hardest retail sales compares in 4 years.
2. The same calendar issues that helped 1H by 300bp hurts 2H by a similar magnitude – that should seem obvious, the reality is that it’s not in consensus numbers bc it’s not in the guidance narrative.
3. Retailers are budgeting for a 2-3% comp, which is extremely aggressive. Whether you believe this plan or not, the fact of the matter is that retailers have ordered enough product to drive the comp (they order in units, not dollars). The goods are being made today and will be on a container ship within 2-3 weeks. The flow of product can’t be stopped...

... Add all that up, and our estimates are 1,100bps below the street for 3Q, and 1,400bps below for 4Q – at a time when retail valuations are downright complacent and comfortable.

INVENTORIES LIKELY TO BUILD AT A GREATER RATE THAN WE’VE SEEN IN 3-YEARS.