FSO Editorials

Predictably, Holiday Season Sales Reports Are Very Disappointing

by Bob Bronson, Bronson Capital Markets Research. January 5, 2005

Here are retail chain (same) store sales, in billions of dollars, not to be confused with total retail sales, which also include auto and gasoline sales, among other categories:

Because they are so seasonal as the chart below illustrates, they are best compared on a rolling 12-month basis as depicted in the following chart:

Of course, the full holiday season sales will not be known until early March when the month of February results are in, which will include the overly-touted gift card sales redemptions. Internet sales are also not included in chain stores sales reports, so their accelerated growth also has to be factored in the final holiday season sales results.

But gift card and internet sales cannot significantly increase the 2.3% year-over-year gains of holiday season sales reported so far. Not surprisingly, this sales gain is almost exactly what Wal-Mart reported for November and December. This is despite the financial media and talking heads pooh-poohing the significance of their results because they only track low-end consumers, and not the media-favored high-end consumer holiday sales.

Also the CNBC-hyped 8.1% growth in MasterCard sales was largely irrelevant for the reasons we explained previously. They include: (a) debit card sales, which are largely only a substitution of cash, check and even some debit card sales; plus (b) vacation sales, which conventionally are not considered holiday sales; plus (c) gift card sales, which, again conventionally, are not considered until they are redeemed, and that is typically spread over the first few months of the new year.

Also, as we expected, these paltry mid-two-percent gains are significantly below both last year's 4.0% results, including the nonsense hype of 4.5% growth self-servingly put out by the National Retail Federation. The 2004 holiday season sales results did not come close to exceeding consumer price inflation at 3.6% year-over-year, and hardly exceeded core inflation, ex food and energy, at 2.2%. Such negative "real" holiday sales growth is consistent with our expectation for a second recession to start during this post-Presidential election year during an ongoing K-Cycle Winter.

And even more important to both the stock and bond markets, these mid-two-percent 2004 holiday season sales gains are significantly below recent investor consensus expectations, which were far too optimistic, predictably following the stock market's post-election blow-off rally. The results of such over optimism have been clearly reflected in the stock market with a significantly under performing so-called Santa Claus Rally. It conventionally covers the bullish holiday effects during last five trading days of the year plus the first two trading days in the new year. The seven-day Santa Claus Rally result was -1.8% versus a median gain of +1.6% over the past 55 years since 1949.

As we more fully explained last month, our work shows this stock market rally to new highs "was" a classic bull trap reminiscent of the ones in Dec 68 and Jan 73, which led to devastating bear market declines during that K-Cycle Summer, or what we fundamentally and technically quantify as the previous BAAC Supercycle Bear Market Period.

Contact Information
Bob Bronson
Bronson Capital Markets Research
Email