{"id":3033,"date":"2011-01-26T04:30:31","date_gmt":"2011-01-26T11:30:31","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=3033"},"modified":"2018-09-21T02:08:22","modified_gmt":"2018-09-21T06:08:22","slug":"first-annual-retail-sales-preview","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/01\/26\/first-annual-retail-sales-preview\/","title":{"rendered":"First Annual Retail Sales Preview"},"content":{"rendered":"<p><span style=\"font-size: 16px;\">This is the first of what will become an annual feature of the &#8220;what my intuition tells me now&#8221; blog: a <em>qualitative<\/em> preview of retail sales figures.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">The reason this preview comes in January, rather than December, is that most retailers report their annual sales numbers for the year prior at the end of January.\u00a0 By doing this they capture in their totals all of the holiday sales, plus the post-holiday sales.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Retail sales are among the most important economic numbers because around <a href=\"https:\/\/jasonapollovoss.com\/web2010\/04\/30\/first-quarter-gdp-numbers-are-in\/\" target=\"_blank\" rel=\"noopener\">70% of gross domestic product (GDP) is made up of consumer purchases<\/a>.\u00a0 So if you understand and can anticipate retail sales you have a pretty good idea of how the economy is going to perform.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">To be clear, I am not going to forecast the year just passed, 2010, but what I expect for the upcoming year, 2011.\u00a0 Here I am talking about January 2011 to January 2012.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Here&#8217;s is the overview of how we are going to look at this&#8230;<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">grocery stores<\/span><\/li>\n<li><span style=\"font-size: 16px;\">restaurants<\/span><\/li>\n<li><span style=\"font-size: 16px;\">cars<\/span><\/li>\n<li><span style=\"font-size: 16px;\">consumer electronics<\/span><\/li>\n<li><span style=\"font-size: 16px;\">clothing<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Officially there are more categories reported by most prognosticators, however, I consider these to be the core places where people spend their hard-earned money.\u00a0 So getting these five categories right will give a powerful indication as to how the economy is going to do as a whole.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Let&#8217;s take the above categories, in turn.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\"><strong>Grocery Stores<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">It doesn&#8217;t take a rocket scientist to know that the cost of food is up.\u00a0 All of the big categories from meat, to milk, to dairy, to produce, are all up in price.\u00a0 However, food prices are also up for grocery stores themselves.\u00a0 However, most stores have been able to expand their gross profit margin on food stuffs.\u00a0 Furthermore, wages at grocery stores, like almost all wages in the economy, are flat.\u00a0 So the two biggest expenses for grocery stores, food costs and wages, are flat to down.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">The recession has led to many more people cooking at home rather than eating out in order to save money.\u00a0 In other words, grocery store sales have been rising.\u00a0 The combination of rising sales and flat to slightly lower expenses means that grocery stores are doing very well, profit-wise.\u00a0 This combination led to a robust 2010 total.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">However, as consumers begin to feel more confident in 2011 about the economy, their job security, and their personal finance situation, they will begin to curtail their grocery store runs and cooking at home.\u00a0 Thus, I anticipate a 2011 that sees flat to slightly down sales.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\"><strong>Restaurants<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">Restaurants have gone out of their way to keep customers over the last three years, 2008 through 2010.\u00a0 They have offered value meals, reduced-calorie count menus, increased-calorie count sexed-up fatty menus, and so on.\u00a0 The pressure on restaurants to keep customers is likely to begin easing.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">As people feel better about their financial situations they like to eat out &#8211; it keeps the energy of relief and celebration going.\u00a0 In the restaurant business it&#8217;s all about volume.\u00a0 Effectively diners rent the table for the time that they are at the restaurant.\u00a0 The more tables that are full, the more rent.\u00a0 My impression is that consumers have felt that they were scrimping over the last three years.\u00a0 One easy way to relieve yourself of that feeling is to eat out.\u00a0 So volumes will be up.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Prices at restaurants will probably begin to rise slowly in the latter half of 2011 as restaurants realize that volumes are real and stable.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">This combination of factors means that 2011 is likely to be a good year for the restaurant industry.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\"><strong>Cars<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">One of the surprising figures during the Great Recession was the strength of car sales.\u00a0 Largely this was driven by government incentives, like <a href=\"https:\/\/jasonapollovoss.com\/web2009\/08\/03\/cash-for-clunkers-massive-success\/\" target=\"_blank\" rel=\"noopener\">the &#8220;Cash for Clunkers&#8221; program which was among the most brilliant uses of tax payer money ever invented<\/a>.\u00a0 It single-handedly saved the car industry, kept all of those blue collar jobs around, reduced the pressure on the financing businesses of car manufacturers, and got a number of polluting vehicles off of the road.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Car sales have remained strong.\u00a0 I expect them to get slightly stronger.\u00a0 Why?<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Many people have continued to drive and then repair their old, already paid off cars rather than add a new monthly payment for a new car to their budget.\u00a0 This will end as the unemployment numbers start to improve.\u00a0 Folks have been prioritizing paying off their high-interest credit cards.\u00a0 Room in the budget is now available for a new car payment.\u00a0 Plus, psychologically, one of the great ways of engaging in retail therapy is to buy a new car.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">So I expect 2011 to be a good year for the car industry.\u00a0 I expect sales to be slightly up from 2010 levels.\u00a0 If the jobs situation capitulates and improves rapidly then there will be surprising strength to the upside in terms of car sales.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\"><strong>Consumer Electronics<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">Wow!\u00a0 That is the word that describes this continuously miraculous retail category.\u00a0 We all love our gadgets, from killer 4G cell phones, to flat panel televisions, to surround sound stereos, to lap top computers, to pad computers, to BluRay DVD players, to&#8230;?\u00a0 And that&#8217;s just it, what else is there to buy in this category?<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Unlike most prognosticators I would not at all be surprised to see a disappointing year in the consumer electronics space.\u00a0 I am not predicting a down year here for this category.\u00a0 But if there were a surprise here, it will not be a positively up surprise, it will be a surprise in terms of downside disappointment.\u00a0 The reason is that most of the cool gadgets have already made their way into our lives.\u00a0 It&#8217;s not that there isn&#8217;t cool stuff on the horizon, it&#8217;s just that in terms of incremental coolness factor, they are refinements to cool, not revolutions in cool.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Nonetheless, my own feeling is that this category will see slightly up sales from 2010.\u00a0 But the possibility for disappointment looms.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\"><strong>Clothing<\/strong><\/span><\/p>\n<p><span style=\"font-size: 16px;\">My wife Dawn works in the fashion photography business and they have been devastated over the past three years.\u00a0 That is not what I expect in 2011.\u00a0 One of the easiest ways for people to improve their budgetary situation is to cut back on clothing purchases.\u00a0 Many people have been wearing the same stuff for many years now, adding new articles of clothing when something was truly outstanding, and <span style=\"text-decoration: underline;\">on sale<\/span>.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Conversely, one of the easiest ways for people to feel better about their psychological situation is to adorn themselves with new clothing.\u00a0 Emerging out of the Great Recession will be many, many people who have been anticipating &#8220;going shopping.&#8221;\u00a0 So I expect that clothing sales are going to be very strong in 2011.\u00a0 Not only that, but I fully expect that many of the killer bargains that have existed for the last three years will begin disappearing.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">In conclusion, 2011 is going to be the first year since 2007 that feels like a &#8220;normal&#8221; year as a consumer.\u00a0 Couple that sense of normality with the understandable relief that will be felt by many and you have the makings of a great retail 2011.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Gross domestic product typically grows 3-5% in a positive growth year.\u00a0 I am expecting that retail sales will be up on the high end of that range: 4% plus.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 16px;\">Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is the first of what will become an annual feature of the &#8220;what my intuition tells me now&#8221; blog: a qualitative preview of retail sales figures. &nbsp; The reason this preview comes in January, rather than December, is that most retailers report their annual sales numbers for the year prior at the end of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3,15],"tags":[],"class_list":["post-3033","post","type-post","status-publish","format-standard","hentry","category-the-blog","category-predictions"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3033","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=3033"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/3033\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=3033"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=3033"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=3033"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}