Wednesday, November 30, 2011

"Black Friday Boom": The Smoke Clears, The Truth Appears...

Yesterday we worked on popping the media-driven economic optimism based on 'increased" Black Friday spending"

When the broader picture is examined, and trend lines are studies, things look a lot worse close up than they actually appear:

The biggest retail sector is cars and car parts, which account for about 18 percent of the total; they're up 10.1 percent so far this year. Food and beverage stores — i.e. groceries—constitute about 13.2 percent of sales, and they're up 5.6 percent through the first ten months. Gasoline stations alone account for 11.7 percent of total sales, and their sales are up 19 percent so far in 2011, thanks to higher gas prices.

If you factor out clothing - a necessity for most of us - and factor in inflation, retail is getting killed this year. None of which is mentioned in any of the "Black Friday" success stories being put out by the media. Furthermore, is the 6.6% increase in Black Friday sales an indicator of future increases for the holiday shopping season? Or are huge sales backed by saturation ad campaigns just moving demand up, resulting in much smaller increases (if any) from now till Yule...

Here's Tyler Durden, today, backing up our hypothesis:

The rumors were all true: record sales... on negative margins. Because it is not difficult to dump product when you are, well, dumping.

And he hones in on something that is nearest and dearest to the American consumer...TV sets:

Feeling Blue about Black Friday TV Sales — Investors seemingly cheered aggressive LCD TV promotions and anecdotal reports of healthy sell-through. We agree that price promotions were certainly aggressive, but we are left feeling "blue" about Black Friday – What does it say for the state of LCD TV demand if the only way to stimulate unit growth is with massive price cuts? If the supply chain was unprofitable before recent aggressive retail pricing, how much worse will it be going forward as consumers' expectations are now likely anchored at the lower price points?

How many stores will shutter right after the new year?  And how long can the media continue on with their economic "Remain calm, all is well" message?

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