Yesterday David Bodamer noted how final November retail numbers were clearly a disappointment, as analyst estimates proved way to optimistic.
Deutshce Bank retail analyst Bill Dreher takes a stab at what happened, and though he kind of blames the weather, he’s clearly not comfortable with that excuse.
Despite the month of November having the easiest compares of the year, every sub-sector
of Broadline retailing missed consensus expectations, including the Discount Stores (TGT),
Warehouse Clubs (COST & BJ), Drug Stores (WAG & RAD) and Department Stores (DDS, M,
JCP, and SKS).
Going into today, we expected several department stores to post November sales that
missed Consensus estimates, and in particular we looked for weakness from Macy’s & Saks
(see “November Sales Update” published Tuesday).
In addition, while JCP and SKS were very much in-line with our expectations and
management’s guidance, they missed consensus estimates and the print was poorly
received, with the stores down 3% and 5%, respectively, today.
Weather was commonly considered the culprit, as most of the country did not have
seasonally appropriate temperatures. We understand how weather would limit apparel sales,
and we can even appreciate how the unseasonably pleasant weather would cause a modest
flu season limiting the Drugstore comps.
What causes us to be incrementally concerned are the misses from the Warehouse clubs
and Target; how did the weather contribute to these sales misses? Food deflation clearly
would aggravate the sales sluggishness for these retailers, but that doesn’t seem to be
enough to explain the results. Perhaps we will need to wait for Kroger results this Tuesday
for additional colour on this food inflation & Wal-Mart pricing umbrella issues.
The overall take away from today has to be incrementally negative. Unless Wal-Mart achieved
some surprisingly massive market share gains across all these sub-sectors of retailing,
today’s widespread sales weakness is a negative indication on overall consumer spending.