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Misleading headline of the day: Retail Sales Surprise with Gain of 0.2% in March

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April 14, 2008 – Comments (1) | RELATED TICKERS: BLOKA.DL , CC.DL2 , GE

So we all woke up to the following headline this morning: “Retail Sales Surprise with Gain of 0.2% in March” (who am I kidding, I had been up for hours at that point, but you get the idea).  At first glance, one might think “Huh, that’s not too bad.  At least sales were up.”  This number is higher than the flat to down 0.1% retail sales number that analysts were looking for and the futures rallied after its announcement.

Well, as the great Lee Corso says in his college football broadcasts “Not so fast my friend.”  As usual, this is a misleading headline and statistic.  Sure, retail sales were up for the month, but its only because prices were up so much because inflation is out of control.   For example, sales at gas stations rose 1.1% during the month.  After backing out the gasoline sales, retails were actually flat, which in itself is a miracle considering what the economy is like right now.  The fact that retail sales were flat is probably a slight bounce from the dismal February retail sales number, down a revised 0.4% (from an original –0.6%).

Higher prices for things that we all have to purchase, like gas, are not an indication of a strong retail environment.  On the contrary, high food and gas prices are actually a bad thing for consumers and retailers.  Let’s take a look at the raw numbers and see what sort of shape the U.S. retail environment is really in:

- Building materials and garden supplies dealers: -1.6%

- Furniture store sales: -0.3%

- Electronics and appliance stores: -0.4%

- General merchandise stores: -0.6%

Not very pretty.  But wait you say, look at the strong numbers at food and beverage stores, +0.4%, and eating and drinking places, +0.3%.  The consumer must be in good shape if they’re going out to eat and buying expensive food right?  WRONG.  I suspect that all of these increases are because food prices have skyrocketed.  Here’s a link to a great Business Week article on rising food prices here in the U.S.:  Squeezed by Rising Food Costs

The only two categories that I see legitimate strength in are "mail order and Internet retailers" up 2.1% and sporting goods, hobby and book stores up 1.4%.  The strong Internet sales may be an indication that people don't want to spend money on gas to drive to the mall and I personally probably accounted for a large percentage of the book sales ;).

I realize that at some point retail stocks will have to hit a bottom, but I personally think that they are headed for a lot more pain over the next year.  I wouldn’t want any exposure to any retail stocks in my portfolio right now.

Retail Sales Edged Higher in March

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Two other quick things that caught my eye this morning:

1) This is a hilarious headline: GE Brings Bad Earnings to Life .  Man I wish I had thought of that one.

2) Blockbuster Bids 1B for Circuit City  WHAT?!?!  HAHAHAH.  Nothing like combining two terribly run organizations into one terribly run powerhouse.  How can Blockbuster even afford to buy Circuit City?

That's all for now.

Deej

No position in BBI, CC, or GE

1 Comments – Post Your Own

#1) On April 14, 2008 at 10:36 AM, charlesblazer (99.07) wrote:

Thank you, once again, for shining light on the truth.  The press is inept.

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