The News is (Nearly) All Good

The November results posted yesterday were surprisingly good and (for once) more in line with NRF numbers than ShopperTrak’s more guarded reporting. Without reporting from Walmart, we are not seeing the entire picture but it’s clear that department stores and “upscale” discounters (Target as opposed to the dollar stores) are regaining share. There is evidence that consumers feel “permission” to do more discretionary spending than they have felt for awhile, especially in apparel and the home store. Last weekend was not just about electronics, toys and doorbusters.

Nevertheless, today’s jobless report is a sobering reminder that we are not out of the woods yet. Let’s hope that the uptick in consumer sentiment and spending is not smothered by a wet blanket of tough economic data three weeks before Christmas!

What I found most interesting is the number of retailers who reported that shoes were an especially strong performer in November. Kohl’s said the footwear sector was the best performing category, and Neiman Marcus and Saks also reported strong shoe sales.

We can call it the shoe spending index. Shoes along with jewelry were some of the first products to slow down in the recession. With the big bump in shoe sales (along with jewelry) it’s a clear sign the consumer is opening the wallet more.

I wasn’t surprised to see traffic up. God knows there were plenty of incentives to buy.

The time that really matters is RIGHT NOW. The next 2 weeks. If sales dip too far, retailers will get way over-aggressive in their discounting. Too dramatic of a U-shaped sales curve will spell bad news. The devil is in the details, and the details are post-Cyber-Monday through December 12.

That traffic is up does not surprise, but like most numbers, they often tell only part of the story.

Retailers should be mindful of how consumers are paying. Reports are that debit card use will increase and that means there will be a ceiling on total spend. Maybe sales were strong as budget conscious consumers too advantage of early discounting.

If the predictions of debit card use and adherence to budgets becomes true, sales will be moderated throughout the balance of the holiday.

The sales started strong and early. The consumers responded. The sales are continuing and consumers are still spending. It does look as though sales for the season are likely to be up this year. Profits may be another issue. A critical factor for the future is whether spending will continue into next year or whether this is just holiday shopping.

For the first time this year I took advantage of Black Monday cybersales to Christmas shop for my American family. Partly because of the discounts, partly because I wanted to allow enough time for delivery. And partly because I suspected that if I didn’t buy what I wanted when I wanted, they would soon be out of stock. As it was, the toddler-sized dress I bought was my third choice and I was unable to get the scarf and mitten combination I liked from the same store. Buying in different stores would have incurred extra delivery charges (and yes, folks, lots of stores do charge them and they are very hard to avoid if spending small amounts in different places and then shipping to Alaska). So all is not as rosy as it may seem when shopping online and there are lots of different reasons why November sales may have been high.

Retailers have been hitting their heads against the wall for several holiday cycles now. So it’s no surprise that it feels good to stop.

It is heartening that sales are up on a relative basis compared with a year ago, but I’d resist calling this a full-blown recovery due to some fundamental unknowns. One indicator I’d like to see, mentioned above, is the relative willingness of shoppers to use credit versus pay as they go. Another would be markdown trends in the remaining weeks of the holiday season.

While investors are feeling pretty good about their portfolios of late, I am hesitant to link current investment performance too tightly to middle-class confidence. Remember, for every bargain buyer of shares in the past two years, there was a bargain seller who locked in losses, probably to cover mortgage payments or credit card bills.

November’s promotions helped motivate shopper action–a sign that there is still some cash in people’s pockets. Hanukkah came early too, adding incrementally to early purchases in some regions.

If this sounds like a gloomy take, remember that I’m writing from southern Arizona, which was relatively hard-hit by the housing crunch and remains an unemployment leader. I’m glad recovery has reached Wall Street and Rodeo Drive, but it’s lagging a bit here in Saguaro country.

I don’t think the news that November was a good month for retail surprised too many people. What is a surprise is that it turned out to be as good as it was, especially Thanksgiving weekend.

I’m cautiously optimistic. After the past couple of holiday seasons disappointed, I think there’s a good possibility that sales may come in better than expected this year. Still, there are a lot of headwinds, strength is not across the board yet, and this morning’s unemployment report could very well put a damper on consumer sentiment going forward through December.

I have read all the opinions so far and agree with most of the comments, particularly my friend Paula. She seems to be right on target with the next ten days sales numbers being the determining factor as to the level of success this season.

However, I have said this before and will say it again; Chanukah is early this year. We will light the third candle this evening. Therefore, most observant Jews have already done the bulk of their buying for the season. That means there has to be some serious money spent even after the ten days mentioned by Paula. Here’s hoping. If not, there will be some very disappointed retailers and analysts.

With prices cut to the bone, more stores open on Thanksgiving and the entire season starting almost a month earlier than usual, the increase is no surprise.

What remains to be seen is how much profit got put in the bank. When a mere 20 percent discount means you have to sell almost twice the amount of goods to make the same net profit, let’s just say I’m less optimistic.