Thanksgiving retail sales–more evidence of a healing economy

the National Retail Federation survey

Yesterday, the National Retail Federation, a large retail trade association, released its annual survey of shopping over the Thanksgiving/Black Friday weekend.  The survey, conducted by BIGresearch, polled 3,826 US consumers on November 24-26 about their actual spending and their intentions for the remainder of the weekend. It has a margin of error of +/- 1.6%.

the results

overall

The typical shopper reported spending $398.62 over the weekend.  That’s up up 9.1% year on year, and contrasts sharply with spending behavior in 2010, which was virtually flat (up .3%) vs. 2009.  This is a record high, and the largest yearly increase since 2006.

A lot of people who stayed home last year joined the fray.  Total spending was $52.4 billion, up 16.4% vs. 2010.

Buying was led by consumers in the Northeast, who reported that their outlays are up 24% year on year.  (During the Great Recession, buying remained steady in the South and rose steadily in the West, but fell off a cliff in the Northeast and Midwest.  The latter rebounded last year; this year’s Northeast figures are only slightly above the 2007 level.)  This makes some intuitive sense, since the Northeast was the epicenter of the financial crisis and hurt very badly by it.

The average shopper polled has done 38% of his shopping this weekend, about the same as last year.  Despite having spent the most money so far, shoppers in the Northeast say they’ve only spent 36% of what they intend to.  That’s the lowest regional total.

the rise of the Thanksgiving Day shopper

Although Friday and Saturday are the heart of the retailers’ Thanksgiving weekend, the increase in store openings and special sales on Thanksgiving evening led to 21.9% of survey respondents showing up at the stores during the Thursday holiday.  That’s up from 18.1% who turned out last year.

online shopping increases

This year, shoppers reported that they spent 37.8% of their total online.  That seems like a huge amount, but last year the percentage was 33.3%.

The bigger behavioral change, shown in a companion survey about Cyber Monday behavior, is in the use of mobile devices.  That’s tripled to 14.5% of shoppers over the past three years, and doubled since last year.  This doesn’t necessarily mean that many consumers will order merchandise over their phones or tablets.  Some will, but most use these devices to comparison shop or to check in-store prices.

By the way, the vast majority of today’s Cyber Monday shoppers now buy early in the morning and from their home computers, rather than during breaks at work.

investment conclusions

The survey outcome appears to have the NRF considering whether its forecast of a 2.8% increase in retail sales for the 2011 holiday season isn’t too low.  In my view, it probably is.

To me, aside from the magnitude of the spending increase this year, the most interesting result of the NRF surveys is that they highlight the rebound of the financial services-dependent Northeast after two years of caution.

The overall survey reinforces the view I’ve held for a long time that high unemployment is an urgent social and political problem, but one that will have little negative impact on GDP growth in the US or on the results of publicly listed US corporations.

 

Thanksgiving weekend shopping reaffirms a recovering US consumer

the National Retail Federation survey…

The National Retail Federation released the results of its annual Thanksgiving weekend shopping survey, consisting of interviews of 4300+ consumers, yesterday.

The headline results are:  bigger crowds, $45 billion spent–up about 9% year on year.

The actual survey results, also available on the National Retail Federation site linked to above, contain more interesting information, namely:

–people traded up.  Shopping at discount stores dropped from 34.2% of the respondents in 2009 to 40.3% this year.  In contrast, department store shopping rose from 49.4% to 52.0%, and specialty retail store patronage grew from 22.9% to 24.4%.

–the types of gifts shifted from necessities to discretionary items.  For example,

—–14.3% of respondents said they bought jewelry last weekend vs. a low of 9.6% in 2007, 10.9% in 2008 and 11.7% in 2009

—–33.6% bought books, CDs, videos or video games vs. 41.7% in 2007, a low of 39.0% in 2008 and 40.3% in 2009

—–24.7% bought gift cards/certificates vs. 21.0% in 2007, a low of 18.7% in 2008 and 21.2% in 2009

—–of economically sensitive spending areas, only housing-related (home decor and furniture) is a significant laggard.  Among survey respondents, 20.2%  are spending on this category this year vs. 19.6% in 2007, 20.3% in 2008 and 19.9% in 2009.

–a third of all purchases, by dollar value, were online, with 33.6% of respondents saying they had shopped on the internet.

Many news sources, the New York Times, for example, are reporting that shoppers were also buying things for themselves rather than just holiday gifts for others.

…adds to the evidence of a healthier consumer

Over the past several days, other positive consumer indicators have been announced.  Last week, the Labor Department reportedThe Thompson Reuters/University of Michigan survey of consumer confidence hit a five-month high, although the release itself makes for pretty dismal reading.  While respondents may be feeling more secure now than for almost half a year, they expect the unemployment rate to stay high and salary increases to stay low.

investment implications

For a long time, I’ve been writing that I think that the recovery of the US economy this time around would follow the pattern of the rest of the world (that is, industry improves first, consumer second) rather than the shape it has invariably had in the past, at least throughout my investment career (that is, consumer first, industry second).

Recent data, and especially the NRF survey, seem to me to be in accord with my view.  I read them as saying that finally, almost eighteen months after the economy low, the US consumer is beginning to perk up again.

Ex discount stores like WMT and TGT and home improvement outlets like HD and LOW,  this suggests retailers with significant US exposure may be becoming more profitable than the consensus expects.  Stocks whose main virtue is that the vast majority of their sales are outside the US, in contrast, may begin to lose their allure in Wall Street’s eyes.

It’s relatively easy to check any stock’s geographical revenue breakout (and maybe operating profit, as well, depending on the company).  It should be in the firm’s annual 10-K filing with the SEC, available on the agency’s Edgar website.