Holiday Retail Sales Fantasies

The stock market had an early boost from a report on Bloomberg News issued by an affiliate of Mastercard that holiday retail sales were estimated to be up 3.6% vs. last year.  After adjusting for the extra day between Thanksgiving and Christmas this year, implied sales would be up 1% vs. a year earlier.

To be blunt, I will say that Mastercard's projection is b.s.  But that's just me.  Here's what Howard Davidowitz, a leading expert on the retail industry has to say:  "the consumer is in the tank!" Please watch the interview below of the always lively and engaging Davidowitz from this morning - here are his key points:

- up 3.6% - "if it's real, and of course I don't believe it is" -  is really 1% after you account for the extra day this year

- 60-70% of all same-store sales will be negative, leading Davidowitz to forecast sales to actually be down 1% this holiday season

- online slaes have been very strong this year but are only 4% of retail sales

- mall-based retail/dept store stores lost market share to the discount chains



Not surprisingly, I agree with everything Davidowitz has to say. There is just no way in hell the consumer would be spending more this year, given that unemployment is over 3% higher than last year, the consumer has significantly less access to credit and home equity wealth is trillions lower this year.

Anectdotally, I don't know anyone who did not cut back on gift-giving this year. Furthermore, the huge snowstorm that paralyzed the northeast right before Christmas had to have devastated mall-based sales, even if it had the effect of increasing online sales.

We all know how Wall Street and the Government manipulate and "adjust" numbers. We'll have a much better feel for what really happened between Turkey Day and X-mas on January 7th, when retailers report December sales.  I also expect to see several large retailers file bankruptcy or announce restructurings of some kind, including another round of massive layoffs, during the first quarter of 2010. Zales - the nations largest jewelry retailer - kicked things off over the weekend by announcing that they had hired an finacial advisor to explore restructuring options.