Same-store sales reports issued by various retail chains and other monthly retail data for June 2010 were, depending on whom you believe, either "further evidence of an economic slowdown", a "mixed bag of reports" or reflect "consumer's continued stinginess" and "even the rich cutting back."
In Pictures: 5 Investing Statements That Make You Sound Stupid
Another possibility is that these reports mean nothing at all as the data is too unreliable and complex, and too short-term focused to be incorporated into an investment thesis for the group. Perhaps investors should ignore these reports and focus on which stores will be successful in profitably bringing customers into the store over the long term.
Some retailers have apparently figured this out as well, and have stopped releasing monthly sales data. These companies include Wal-Mart (NYSE:WMT), which used to provide weekly numbers, and then moved slowly over time from monthly to quarterly.
Macy's (NYSE:M) stopped giving monthly sales reports in early 2008, citing confusion over shifts in the calendar and promotional activity. The company resumed monthly guidance about six months later after the vociferous complaints of investors and analysts. The company reported June 2010 same store sales up by 6.5%. (Find out how to make sense of the retailers in Analyzing Retail Stocks.)
One report issued monthly is the MasterCard Advisors SpendingPulse, a proprietary report released by Mastercard (NYSE:MA). This report tracks retail and service sales on the company's payment network.
There are some issues with the MasterCard Advisors SpendingPulse report that make it tricky to use. The report is macro focused and provides data on sub-sectors in retail without a specific company break down. These categories include luxury, jewelry, electronics, appliances, footwear and various apparel subsectors including women's, men's and family and children.
The report captures only Mastercard payments at the retailers, and does not have access to other payment networks. Also, cash and check purchases are not covered and are projected using "survey-based estimates."
The June 2010 report had luxury sales down by 3.9% on a year-over-year basis. The definition of luxury, however, excludes jewelry, which had a strong 10.1% increase. So it would seem that the rich are spending, but only selectively. (Retail sales have a lot to do with consumers' outlook on the economy. Find out more in Understanding The Consumer Confidence Index.)
Another closely watched report is the Advance Retail Trade and Food Services report released monthly by the U.S. Census Bureau. The latest report covering May 2010 indicated sales down by 1.2% sequentially from April. Like the Mastercard report, this one covers only the macro picture, and doesn't have data by store brand.
Although the report has the word "advance" in the title, and is subject to revisions, investors frequently ignore this part. The government adjusts the Advance Retail Trade and Food Services report the following month when its issues the Monthly Retail Trade and Food Services. There is also an annual revision that the government produces that can change the numbers.
Aside from the short-term nature of the information and the unreliability discussed above, there are other problems with an over reliance on monthly retail sales reports. The reports say nothing about profitability of the companies, and only focuses on the top line. Top-line growth is great, but was that done by cutting prices too much or through other promotions.
There is also no reliable method of measuring the promotional activity of a particular retailer, relative to its own history or to its peers. Sometimes a retailer will admit to it publicly, but most information on excessive promotional activity comes anecdotally based on personal observation of the store base.
For those investors that do crave monthly data, here are the highlights of the reports issued so far to date. All the numbers are for June 2010, measured on a year over year basis.
- Nordstrom (NYSE:JWN) - Up 14.1%
- Abercrombie & Fitch (NYSE:ANF) - Up 9%
- Aeropostale (NYSE:ARO) - Up 8%
- Buckle (NYSE:BKE) - Down 7.3%
- Gap Stores (NYSE:GPS) - Flat
- Kohl's (NYSE:KSS) – Up 5.9%
- Limited (NYSE:LTD) - Up 6%
The various reports on monthly retail sales that are available to investors can sometimes provide a confusing and difficult to interpret picture of what's going on in the retail environment. This raises the question of whether too much attention is focused on these snapshots in time.
Catch up on your financial news; read Water Cooler Finance: I-Spy, IPOs And iPhones.
InvestingEven as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
EconomicsHeadwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
Forex EducationThe best times to trade the British pound are centered around economic releases at 1:30 am, 2:00 am, 8:30 am and 10:00 am U.S. ET.
Investing BasicsLearn about 10 companies loved by the modern Yuppie, including how this demographic's impressive buying power has boosted these companies' earnings.
Investing BasicsLower stock returns are likely here to stay for some time. Here are five reasons why.
InvestingGlobally and in the United States, stocks are now in correction mode, with the recent erosion in equities in emerging markets and Europe in a bear market.
Investing NewsNot sure where oil and gold are headed? The answer is complex.
Investing NewsIs it possible that Jessica Alba is one of the savviest businesswomen on the planet?
EconomicsLast week was another difficult one for stocks, marked by a bruising mid-week selloff triggered by China’s surprise devaluation of its currency.
EconomicsAn overview of the common characteristics of Caribbean economies.
A product or service that a consumer sees as comparable. If prices ...
Definition of "fast fashion."
Goods that international travelers can purchase without paying ...
Indicators are statistics used to measure current conditions ...
A business strategy that draws potential customers from online ...
The timeframe during which a credit card issuer can dispute with ...
Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>
Ethical investors have many reasons to consider companies in the retail sector. The sector is broad and features an abundance ... Read Full Answer >>