“When the market is on a roll like this, it ultimately looks for excuses for profit taking, and retail sales provided that.”
– Tony Dwyer, equity strategist FTN Midwest Research (subscription required)
About an hour ago Barry Ritholtz at The Big Picture asked “Retail Sales = Hard Landing?”. My answer is: NO. Now, as those of you who read this blog know, I’m a believer that there will be a hard landing, but today’s retail sales numbers in no way support that.
Consider a couple of interesting facts:
- Walmart’s April same-store sales were down 3.5%; but March same-store sales were up 4%
- Target April same-store sales were down 6.1%; but March same-store sales were up 12%
- Overall April same-store sales for the retailers covered were down 2.3% in April; but they were up 6% in March
Now this can be explained in one of two ways: (1) All of a sudden higher gas prices, the housing bust, etc.. kicked in and consumers really buckled down in April (2) Something else is going on.
And I’d put my money on (2) with that something else being: Easter came 8 days earlier this year pushing Easter sales from last year’s April into this year’s March. That boosted comps last month (+6% in March) and hurt them this month (-2.3% in April).
It makes much more sense to compare this year’s March and April with last year’s March and April. If you do that, this year’s March/April period had a gain of 1.8% (subscription required) compared to last year’s 3.6% gain. Not great. But not terrible either.
That’s why I think these retail numbers mean nothing and today’s action is about profit taking.
UPDATE (Thu 5/10, 12:15pm): I just added the following comment to Barry Ritholtz’s post on today’s retail numbers at The Big Picture:
I just wrote a post “Today’s Retail Numbers Don’t Mean Anything” over at my blog: www.topgunfp.com – I cited Barry’s post.
The bottom line is that the most plausible explanation is that today’s retail numbers, as well as last month’s, are best explained by Easter conming 8 days early this year.
I mean are we really supposed to think the consumer fell off the wagon in April (retail sales down 2.3%) but were fine in March (up 6%)???? If you look at this year’s March/April compared to the same period last year sales are up 1.8%. That’s the real number.
UPDATE (Thu 5/10, 7:00pm): Barry Ritholtz responded this way on his blog:
When the Retailers made their forecasts for April sales, they already knew that Easter was in March.
Despite making adjustments for that, they STILL MISSED ESTIMATES BY A WIDE MARK.
This isn’t brain surgery, people . .
But I have a very good response to that. It’s a one-off event and very hard to estimate the impact. Just pure speculation???? Not really: they also underestimated the effect on March as forecasts were for 4.2% growth and actual came in at 6%. Having underestimated the effect on March, it’s perfectly plausible they did the same thing for April.
Thus, my contention that Easter being 8 days earlier this year than last still seems to me to be a big part of the reason today’s same-store retail numbers came in so bad.
David Gaffen of The Wall Street Journal’s MarketBeat agrees with Barry on this. 🙁
That’s enough on this!!!
UPDATE (Fri 5/11, 9:00am): I checked out The Big Picture this morning and Barry has a link in a new post to this MarketWatch article with this quote from Thomson Financial’s Jharonne Martis:
April’s [results] are not necessarily an indication that consumers are not spending…. They are simply the result of the shift in the Easter calendar.
Also, in her wrap-up of yesterday’s (Thu 5/10) trading entitled “Stocks Decline Amid Profit Taking” (subscription required)Joanna Ossinger had a similar quote from Morningstar retail analyst Kim Picciola.
Again: Up 6% in March and down 2.3% in April and you want to tell me that’s not, significantly, due to a known shift in the calendar but a real reflection of consumer spending. Did 5% of Americans die???? I mean c’mon!!!!