Black Friday and Retailing Stocks: Sales Improve, But It's No Door-Buster

Last Updated Nov 29, 2010 2:36 PM EST

The sales numbers are still sketchy, but reports on the Black Friday shopping extravaganza show just a small improvement over last year. The picture is encouraging nonetheless, especially when it's added to the job gains in October and more recent lower-than-expected claims for initial unemployment. But with the retail stocks, which are up 20 percent in nine days, you've got to be careful, says one cautious observer.

Reports on shopper traffic and sales volumes for the Black Friday weekend are all over the place, but on the whole they do point up. I bought some stuff online, but did not go anywhere near a big-box store over the weekend, and so have to rely on the reports of others.

From the Financial Times:

[ShopperTrak, a research firm] which has customer counting devices at more than 70,000 retail locations, estimates that sales on Black Friday itself rose only 0.3 per cent against last year, to $10.69bn, although the number of people visiting stores rose 2.2 per cent. Sales last year increased 0.5 per cent on Black Friday, according to ShopperTrak's data.
The New York Times put a brighter face on the weekend commerce, calling sales "robust:"
The average amount spent per person from Thursday to Sunday was about $365, more than a 6 percent increase over last year, according to a survey of about 4,300 Americans by the National Retail Federation...
The Times adds that the count of people, 212 million, is way up from 195 million last year, and the highest in the seven-year history of the survey.

Perhaps confirming an improving employment situation and more confident consumer, there was more interest in big-ticket stuff:

Spending on discretionary items rather than bargain-basement discounts seemed to help push the weekend total to a high of $45 billion, up from about $41.2 billion recorded in the last two years.
One possible reason for Black Friday not being so potent is that sales online were very strong:
ComScore, an online research firm, said online retail spending increased 13 percent, to $11.64 billion, in the first 26 days of November versus the same period a year ago. Online spending on Thursday rose 28 percent, and online spending on Friday rose 9 percent, to $648 million, the biggest sales day yet in 2010.
Online sales make up about four percent of the total these days and are growing fast, says the Commerce Department:
The third quarter 2010 e-commerce estimate increased 13.6 percent (±2.5%) from the third quarter of 2009 while total retail sales increased 6.0 percent (±0.5%) in the same period. E-commerce sales in the third quarter of 2010 accounted for 4.2 percent of total sales.
Not everyone is in the holiday spirit, however. David Rosenberg, the nay-saying investment strategist at Gluskin, Sheff in Toronto, has been issuing warnings about overconfidence by U.S. retailers for a while, pointing to how fast their share prices have risen, anticipating holiday strength.
The S&P Retailing index has ballooned more than 20% in the last nine days and has outpaced the rest of the market by 14 percentage points. The retailers in recent months have embarked on a hiring spree of the likes we have not seen since 2006 and have bulked up on inventories at a pace last seen in 2005. Those were the boom years for sales in the last cycle, that is for sure.
But payroll growth was surging, the unemployment rate was half today's level and consumer confidence was about twice what it is today. Plus the credit taps were wide open for anyone with a pulse. In the most recent weekly data through November 17th, consumer borrowing from the banks sank $8.4 billion and has contracted now in five of the past six months - by nearly $20 billion or a 14% annual rate.
A lack of borrowing will keep a lid on spending, he says, as will recent price decreases in electronics, toys, jewelry, clothing and appliances. Here's his downer conclusion on retail spending (I've added a couple of commas):
We'll tell you this much. One price that is deflating that does not at all portend to the vibrant holiday shopping season...is the price of gift wrapping paper. It declined 1.2% sequentially in October... for a 12% slide at an annual rate. That is a record decline for this crucial time of the year, and the price index is all the way down to January 2009 levels, when hands were being wringed and knuckles turning white... [M]aybe it's an early sign that the season may not be as jolly for those long the retailers as the consensus currently expects.
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