Real Holiday Spending Was Negative in 2007

The Retail Sales post-mortem has begun, and it is as we expected: the weakest holiday spending season in five years.

Total sales gains from Thanksgiving to Christmas Eve were a nominal gain of 3.6%, according to data gathered by MasterCard’s SpendingPulse. Taking apart that data, we find that sales actually had a 0.0% gain over 2006 levels.

This weakness was despite the advantages the 2007 calendar gave Retailers over 2006: Thanksgiving fell on November 30th last year (versus November 22 '07), and Christmas Eve was Sunday evening (versus Monday '07). The calendar gifted stores with an extra 8 days of holiday shopping. Plus, retailers even gained part of the final weekend (~about a third) over last year's inconvenient Sunday Xmas Eve.

That sales data includes Food & Energy. It's before we make any adjustments for inflation. It's worth noting that MasterCard’s SpendingPulse data is based on purchases made by more than 300 million MasterCard debit and credit card users; it covers not just store purchases, internet buys and gift cards: It also includes gasoline and meals at restaurants, both of which had seen significant price increases this year.

Excluding just the gas purchases, holiday sales rose a lackluster 2.4%. If we back out restaurants (and their price increases), then I ballpark sales at approximately 2% -- or a bit below the core rate of inflation. In other words, Real Sales may have reflected an actual loss over last year. This was despite the longer holiday shopping season.

What did sell? Well, lots and lots of marked down merchandise. This is likely to pressure retailers’ margins in the coming earnings season. 

Here's the breakdown:

Online spending was $26.3 billion -- a 22.4% gain

Apparel rose 1.4% from a year ago:

    -Men's clothing climbed 2.3% 

    -Clothes for women fell 2.4%

Footwear sales increased 6%

Luxury goods, excluding jewelry, rose 7.1% (incl-jewelery, -1.9%)

That last data point is quite intriguing: If we include jewelry, the luxury category declined 1.9%. I wonder whether this is primarily due to aspirational luxury shoppers (i.e., middle and upper middle class) pulling back, or some reduced spending by the wealthy. Regardless, it is rather unusual.

Finally, gift cards continue to push some sales from December to January. In the 2006 holiday season,  January sales made up 25% of the three-month period's total, up from 23.6% in the 2000-01.

~~~

For those of you who still have some shopping left in you, I have some good news: Many retailers, from the high-end to the low, will start slashing prices Wednesday morning. Open up any paper, and you will see full page ads from most of the major retailers:

Kohl's (KSS) is 60 to 70% percent discounts
Macy’s (M) is 50 to 70% (Plus a $10 coupon for purchases of $25 or more)
Bloomingdales 30-75% off (over 5 full pages in NYT A section)
Saks Fifth Avenue (SKS) from 8 a.m. to noon, clothing will be 50% off 
Lord & Taylor 50-75% reductions
Brooks Brothers 40% off
Toys “R” Us is offering a buy-one-get-one-half-off promotion

The bad news? Americans are increasingly falling behind on their credit card payments. Credit card delinquencies and defaults are surging by "double-digit percentages" according to an Associated Press analysis of financial data from the country's largest card issuers.

We will soon need PDAs like those that Beer & Alcohol companies issue: "If you must shop, then shop responsibly . . ."

Sources:

Unpaid credit cards bedevil Americans
Americans' see their debt woes expand as unpaid credit card bills are on rise
By RACHEL KONRAD and BOB PORTERFIELD
Associated Press, Dec 24, 2007
http://www.newsweek.com/id/81808

Retail Rush Falls Short, Now Come More Sales
KRIS HUDSON, ANN ZIMMERMAN and VANESSA O'CONNELL
WSJ, December 26, 2007; Page B1
http://online.wsj.com/article/SB119859964475049505.html

Weekend Shopping Surge Fails to Salvage U.S. Holiday Sales
Joseph Galante 
Bloomberg, December 26, 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=akoYLU7bOvYQ&

Holiday Spending Is Weak, as Retailers Expected   
MICHAEL BARBARO 
NYT, December 26, 2007
http://www.nytimes.com/2007/12/26/business/26shop.html   

Prices slashed for shopping blitz
ADAM LISBERGDAILY
NY Daily News, Wednesday, December 26th 2007, 4:00 AM     http://www.nydailynews.com/money/2007/12/26/2007-12-26_prices_slashed_for_shopping_blitz-1.html

Comments

[robert.bohrer]

Barry: you are, indeed, the man.

[Brian Croner]

Bernanke's plan is evil. The rich ended up with the holdings of the bad mortgage deals. That means they lose all their wealth and have to take jobs. Instead of this, Bernanke inflated the money supply. Credit is not money. Credit is money for people who work. It's working man's money. The better money is for the people Bernanke is inflating the money supply for- the rich. The rich man's money is something he doesn't have to pay back. All so the rich don't have to work. But that's the reason we have a US Government and a US Dollar in the first place- so the rich don't have to work.

Wow. We're watching the economy buckle the workers' knees. It's gonna be a rough 2008.

[Brian Croner]

From now on, all my labor output has to be paid back. By decree, every hour I work, I must be paid that labor equity back at 115% of the rate I supplied it initially. The APR of my labor output is 15%, so the US Dollar and system is racking up a labor credit bill by having me living and working in this nation. If the nation defaults and fails to deliver me the goods and services that have attained a compound interest, I am welcome to loot rich people's houses to claim physical ownership of what's mine. My work output is a loan to the system, and is in no way permanent. Cuz I say so.