Last week, while the market was soaring as news of the upcoming Fed's FX swap lines was being leaked, the general media's narrative goalseeked to the stock spike was that it was a function of "record" Black Friday sales. Alas, as often the case, there is some unpleasant fine print to go alongside this seemingly bullish proclamation. David Rosenberg explains why the shopping bonanza hangover is coming, and why, just like in the cash for clunkers case, it means that a late November shopping record means an imminent plunge in retail traffic...as soon as the bills come in.
Hangover Coming
Credit card usage was quite rampant on Black Friday — it outstripped cash and debit-card payment by more than a two-to-one ratio. But when the bills come in early in the New Year, look for a bit of a consumer pullback — another risk to the Q1 outlook (especially if we wake up on December 17th and realize that Congress has recessed without extending last year's tax goodies into 2012 — see House G.O.P. Is Divided On Extension of Payroll Tax on page All of the Saturday NYT).
Despite all the hoopla over Thanksgiving, total chain store sales only came in +3.2% YoY in November, which was light versus consensus expectations and far slower than the 5.5% pace of a year ago. Volumes may have been blown out, but the retailers cannibalized their margins with the widespread promotional activity (Have a look at In Bargain Aisle, a Squeeze on Margins on page Cl of today's WSJ). Not only that but one-third of the retail universe missed their sales targets last month. And guess what item was the hottest seller in the post-Thanksgiving sales rush? Try ... hand guns: a record 32% YoY pace (to 129,166 — based on FBI background checks). All of a sudden, being a bank teller or gas station attendant just became a tad less safe.