Competitive Analytics | US Retail Trade - Competitive Analytics

US Retail Trade

June 23, 2009

We cover three of the numerous Idiosyncratic market benchmarks we analyze for US Retail Trade. We also deliver a summary of several anecdotal indicators of economic conditions.

US Retail Trade sounds incredibly boring but it’s extremely fascinating and reveals answers to questions regarding “how” and “how much” consumers are spending.  But raw data, press releases, and simplified analysis reveal very little. One method to gaining deeper insight is by “overlaying” baseline and/or analogue indicators which will yield more meaningful market knowledge.  And generating actionable market insight does not come easy; it takes experimentation, analytical wisdom, and lots of data-crunching. So for this week we synthesized reams of sales performance data on all U.S. retail corporations with assets of $50 million or more as well as revolving consumer credit outstanding…and the 1Q09 results are NOT commensurate with what you are hearing, seeing, and being told…

I. Consumers Still Spending at Relatively High Levels.  1Q09 Retail Sales at large retailers are $490 billion which is down 43.4 billion (-8.1%) from 4Q08 and down 60.6 billion (-11.0%) from a record high during 4Q07.  One point we must emphasize in a stentorian manner is that although retail sales downshifted, this deceleration is modest when compared to the severity of the “near-trough” and “deep recessionary” macro-economic fundamentals the US is experiencing. So why is retail spending still relatively high when the overall health of the economy is still considerably weak?  This is a complex question but here are four summarized reasons: 1) increases in fuel prices, 2) increases in auto sales due to the fire sale of inventory among the 3,000 auto dealerships closing; 3) consumers only slightly decreasing their addiction to plastic as Revolving Consumer Credit Outstanding is only 3.6% below the all time high; 4) Psychologically, there may still linger a mode of denial and “repression” among wide swaths of consumer segments whom “read” and “see” and “hear” the consequences of a dismal economy yet have not been able to “downshift” their own spending habits to any meaningful and commensurate manner.  Read on.

II. Households Need to Tighten Belts Further – I know we have all read a bevy of articles about how everyone is “battening down the hatches” and “shutting off the spicket” of spending; however, our calculations tell a much more tame tale of frugality. The figures in the table below were prepared especially for this release to clearly illustrate that households are still spending waaaay too much:

$4,318 is the amount each household spends per quarter at large retailers – this is $389 MORE than what households spent during 1Q2006 which was during Phase 1 of the 9 Phase Business Cycle (i.e. peak phase) and only 12.3% below the all time high during 4Q2007.

$8,345 is the average credit balance per household which is the 6th highest quarter EVER and only 3.6% below the all time high during 4Q2008.

III. Net Income of Large Retailers Way Down – Due to the deep discounting of consumer goods and services across the economy, net income for the first quarter is the lowest it has been since 2001 and 57.3% below the all time high.

In closing, we are headed for a very slow summer on a national and global level.  However, we see encouraging signs in specific geographic submarkets, product segments, and service segments that transcend national forecasts.  We recommend monitoring retail metrics and their respective “Cycle Equilibriums.” For customized analytics, please call.

Retail Trade for Retail Corporations With Assets of $50 Million and Over – United States
Quarterly Synopsis – Dollars in Millions

 
B-Cycle
Sales
Sales/HH
RCCO
RCCO/HH
NIAT
NIAT/HH
1Q2001
$318,014
$3,071
$694,772
$6,710
$5,834
$56
1Q2002
$336,407
$3,212
$716,423
$6,840
$7,200
$69
1Q2003
$354,328
$3,344
$753,041
$7,107
$11,283
$106
1Q2004
$394,605
$3,681
$775,280
$7,232
$11,429
$107
1Q2005
$426,016
$3,929
$803,766
$7,412
$12,307
$113
1Q2006
$467,945
$4,266
$827,111
$7,540
$15,563
$142
1Q2007
$497,640
$4,484
$880,746
$7,936
$14,361
$129
1Q2008
$511,164
$4,553
$949,944
$8,462
$11,258
$100
1Q2009
$490,388
$4,318
$947,769
$8,345
$8,464
$75
1Q2010
client only
client only
client only
client only
client only
client only
1Q2011
client only
client only
client only
client only
client only
client only
5Q Trend
           
1Q2008
$511,164
$4,553
$949,944
$8,462
$11,258
$100
2Q2008
$531,591
$4,722
$953,836
$8,472
$12,418
$110
3Q2008
$517,861
$4,586
$971,669
$8,605
$8,267
$73
4Q2008
$533,767
$4,714
$980,257
$8,656
-$1,481
-$13
1Q2009
$490,388
$4,318
$947,769
$8,345
$8,464
$75
             
$Var. High
-$60,578
-$604
-$32,488
-$311
-$11,336
-$105
%Var. High
-11.0%
-12.3%
-3.3%
-3.6%
-57.3%
-58.4%
Cycle EQ
client only
client only
client only
client only
client only
client only
TPSI
client only
client only
client only
client only
client only
client only
 

KEY

Sales = Gross sales of all retail corporations with assets of $50 million and over
RCCO = Revolving Consumer Credit Outstanding
HH = US Households
NIAT = Net Income After Taxes of all retail corporations with assets of $50 million and over
$Var. High = Dollar Variance From All Time High
%Var. High = Percent Variance From All Time High

TPSI  = 1000 Point Strength Index and is the most comprehensive and precise market measurement tool of its kind.  500.0 is benchmarked as the mathematical stabilized equilibrium; historical figures and forecasts above or below 500.0 reflect relative strength or weakness, respectively.  The TPSI has the ability to track and forecast over 2,800 market indicators and capable of in-depth analysis, forecasting, and dynamic what-if analysis of macro economies, industries, organizations, product types, services, and competitive geographic market areas. Click here for an example.

Why Track this Indicator? Retail Trade tracks the performance of large retailers and thus a material level of consumer spending.  If consumers do not spend, business is in trouble.  Got it?  Good.  Now keep an eye on this demand indicator. Much market knowledge can be gleaned and absorbed by your organization by tracking sales metrics by the overall economy and deeper insight gained by tracking, analyzing, and forecasting performance metrics by your sector, industry, product types and geographic submarkets.  Call us if you require assistance in customizing your analysis.

 
Idiosyncratic Market Benchmarks

Escapism Businesses are realizing strong growth. Harlequin is the publisher of romance-novels and generated sales 32% higher in 2008 from 2007 and still rising during 2009. Match.com is the on-line dating site that realized their busiest quarter in 7 years during 4Q08. The National Association of Theatre Owners (the other NATO!) reported that theater box-office sales increased in each of the prior five recessions and the number of movie tickets sold in the first quarter of 2009 increased more than 9% from last year.

FedEx is an insightful proxy of economic health since this ubiquitous carrier ships everything from software, monkey wrenches, and perfume.  FedEx’s May 2009 quarterly financials posted a loss of 876 million on 7.8 billion in sales versus a 241 million loss on 9.8 billion during the same period last year.  CA forecasts a continued downshift of FedEx performance throughout the balance of 2009.

Dry Cleaning Pickups may be a strong “coincidence indicator” since more people will be picking up dry cleaning when times are good versus picking-up an iron; and data from 5,000 members of the International Drycleaning and Laundry Institute indicate that more people are spending more time with their ironing board.

 
An Extra 60 Seconds
Careful recommendations for the busy executive.
 
Article Link of the Week: US recovery scheme slowed by state fears – By Sheila McNulty.
 
Business Book Link of the Week: Distress Investing: Principles and Technique – By Martin J. Whitman.
 
SEQOL Link of the Week: THIS TALK OF SOUL: WHAT DOES IT MEAN? – By Mary Stamper.
 
Quote of the Week: “Envisioning below the surface of habitual perceptions allows for deeper understanding of ourselves, others, and the human condition. Without a holistic interpretation of life and a multi-lens visage of the world around us, life becomes exceedingly vacuous, soul-less, and spiritless. Look below the surface.  Look inside, deep, and under. There you will unearth the knowledge and meaning you wish to discover” -Vidda Zsivaltow.
 
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