The news is super optimistic. This is going to be a great Christmas.
For online sales, yes. Profit margins are slim. For retail shops, not so hot. Barry Ritholtz explains.
Let’s take a closer look at the annual hype that kicks off the season I like to call “Shopmas.” The actual data are much more revealing about the state of the consumer, the retail sector and the overall economy than the holiday hype.
We begin with a quick review of the retail sector in 2011: Sales improved versus 2010 by 3 to 4 percent. We use year-over-year comparisons because of the highly seasonal nature of retail sales. In 2010, sales were fairly soft, in part because much of the nation experienced severe weather. In the business, we call those “easy comps” — a low comparable data point that should be easy to beat.
Based on the first 10 months of the year, holiday shopping in 2011 should see similar improvements. Consistent with the year-over-year retail numbers, expect sales gains of 3 to 4 percent. Even so, these numbers come with caveats.
The first warning it this: price inflation. Prices in some products have risen — in some cases, substantially. “The three most noteworthy are gasoline (up 15 percent), food (5 percent) and cotton (a whopping 230 percent).”
Let’s go back to the Black Friday hype, and see how this stacks up: Each year, we are deluged with “soft data” on Black Friday. We hear about foot traffic, personal surveys and expectations for the season. Overall, these early projections tend to paint a rosy picture of holiday spending.
The reports released with Black Friday and the holiday weekend are from trade groups representing retailers. (They do not hide this.) Each year, they make wildly optimistic projections, which are repeated in the media like clockwork. By the time the actual data come in, the projections have been forgotten. By then, we learn that early reports were pure hokum, put out by trade groups to create a “positive shopping environment.”
But can we rely on these? No.
How far off have these surveys been in the past? Enormously. In 2005, based on a survey on Black Friday and Saturday, the NRF forecast a 22 percent increase in holiday shopping gains for the Thanksgiving weekend. The results? Up just 1 percent.
It happened again in 2006. The projected 19% turned out to be about 5%.
In 2010, Black Friday weekend sales rise were estimated at 9.2 percent, and overall sales were forecast to rise in November and December 2010 by 11 percent. (They rose 5.5 percent.)
Retail sales rose 8.7% on Black Friday, not the National Retail Federation’s announced 16%.