RETAILERS IN DEEP TROUBLE

“Facts are stubborn things, but statistics are pliable.” ― Mark Twain

I never believe government manufactured numbers. They will always be adjusted, massaged, and manipulated to achieve a happy ending for the propagandists attempting to control and fleece the sheep. Yesterday, the government produced retail sales numbers for August that were weak and the corporate MSM propaganda machine immediately threw up bold headlines declaring how strong these numbers were. Positive stories were published on the interwebs and Wall Street hack economists were rolled out on CNBC, where the bubble headed bimbos and prostitutes for the status quo like Jim Cramer and Steve Liesman declared the recovery gaining strength. Woo Hoo.

If everyone else is whipping out that credit card, why aren’t you? Credit card debt has reached a new post recession high. They tell me consumer confidence is soaring. Forget about the 92 million working age Americans supposedly not in the labor force. Forget about real household income hovering at 1999 levels. Forget about median household net worth still 30% lower than 2007. Forget about what you see with your own two eyes in malls, strip centers and office parks as you motor around our suburban sprawl empire of debt. Those Store Closing, Space Available, and For Lease signs mean nothing.

I didn’t get a chance to peruse the commerce department drivel until this morning. They put out unadjusted data and adjusted data. Shockingly, the adjusted data is always rosier than the unadjusted data. I wonder why? I can understand the rationale for adjusting month to month data due to holidays and calendar events. But I still don’t trust the adjustments. There should not be a major difference when comparing year over year data. The adjusted data should reflect the same relationship to the unadjusted data on a year over year basis. Well guess what? It appears our friendly government drones may be pumping the current data to give the appearance of recovery. Here are my observations after taking a look at the government propaganda report:

  • The unadjusted retail sales were only 3.2% higher than last August. Considering government reported inflation of 2%, that is a pretty shitty result. But have no fear. The “ADJUSTED” retail sales for August were 5.0% higher than last August. WTF? Guess which number gets reported to the sheep?
  • Hysterically, your government drones consider lending deadbeats $40,000 for seven years with no money down to drive away with a GM deathtrap SUV as a retail sale. The billions in subprime auto loans led to an 8.8% YoY surge in “ADJUSTED” auto sales. It seems the unadjusted number only went up 5.3%.
  • When you back out the Federal Reserve/Wall Street pumped auto sales, which will ultimately result in billions of written off bad debt (you’ll pick up the tab), unadjusted retail sales were only 2.7% higher than last August. With real inflation of 5% or more, real retail sales are negative on a year over year basis.
  • Despite financing deals of 4 years with no interest, furniture and electronics retail sales were flat versus last August. If there really is a housing recovery and 2.1 million more Americans are employed versus last August how could these discretionary sales be flat, and negative on an inflation adjusted basis?
  • Grocery store sales were up only 2.1% over last year. Even the government is reporting 2.7% food inflation in the last year. We all know it is closer to 10%, so people are actually reducing the amount of food they are buying. That is a sure sign of an economic recovery.
  • Clothing store sales were flat and department store sales were negative versus last August. So much for the back to school storyline. I do believe August is back to school time. The Sears and JC Penney Bataan Death March trudges toward bankruptcy.
  • What did surge was sales at restaurants and bars. They soared by 6.8% versus last August. We already know Darden, Yum Brands and McDonalds have reported dreadful results, so either the government is lying, soaring food prices are being passed on to customers, or people are so depressed by this awesome economic recovery they are drinking themselves into a stupor.

As a side note on the accuracy of this government data, in a previous role at IKEA, when I was a much younger man, I was responsible for filling out the monthly government retail surveys for the Census Bureau. The government drones collecting this data do not check it. They do not require proof that it is right. It is self reported by retailers across the country. Filling out this crap for the government was about as low on my priority list as whale shit. If I was really busy, I’d make the numbers up, scribble them on the form and put it in the mail. The numbers the government are accumulating are crap. And then they massage the crap. And then they publish the crap as if it means something. It’s nothing but crap.

When you see the headlines touting strong retail sales, you need to consider what you are actually seeing in the real world. RadioShack will be filing for bankruptcy within months. Wet Seal will follow. Sears is about two years from a bankruptcy filing. JC Penney’s turnaround is a sham. They continue to lose hundreds of millions every quarter and will be filing for bankruptcy within the next couple years. Target and Wal-Mart continue to post awful sales results and have stopped expanding. And as you drive around in your leased BMW, you see more Space Available signs than operating outlets in every strip center in America.

My anecdotal proof of this relentless slow motion retail trainwreck is twofold. We received our second 30% off discount coupon from Kohl’s in the last three weeks. We are so indifferent to these constant offers that we didn’t even use the first one. I have to wear dress clothes to work every day, so I went over to Kohl’s this morning when they opened at 8:00 am to get some dress shirts and pants.

The parking lot was an oasis of empty spots and there were maybe 5 customers in the entire store. I went to the mens’ section and was shocked to see about two dozen 60% to 80% off racks. There are usually two or three racks. The store was overflowing with summer merchandise. Summer is over. The store should have been overflowing with Fall merchandise. They are clearly in the midst of an inventory disaster. I found excellent dress shirts on the 70% off rack. Everything I bought was at least 50% off, even before my 30% coupon and another $10 menswear coupon.

I live in a relatively upscale suburban area and still this Kohl’s is an absolute disaster. Their gross margin is going to be hammered. Profits are going to implode. Kohl’s has always been a favorite retailer of the middle class. Decent quality at reasonable prices. Their comp store sales were between positive 5% and 15% for years, until the 2008 financial collapse. Their struggles since then coincide with the decline of middle class incomes and the fake jobs recovery. The fact that they are spiraling downward flies in the face of the propaganda being spewed by the government and media.There is no recovery for the average American.

My second data point happened on Thursday. An accident on the Turnpike forced me to take Lincoln Drive and Germantown Pike home from work (1 hour and 55 minutes of agony). I hadn’t taken this route in about six months. Germantown Pike winds through the Chestnut Hill section of Philly. This is an artsy fartsy area with boutique retail, chic outlets, and fancy restaurants. The upper middle class frequents the area. The retail stores were always open, occupied and busy.

Not anymore. I saw dozens of empty storefronts, Space Available, and For Lease signs. The open stores had no customers. The trendy eating establishments had few patrons. Even the yuppie latte drinking areas are beginning to crumble. Every office park I passed had Space Available signs in front. The amount of vacant retail and office space in this country is too vast to comprehend and is being under-reported by the real estate whores whose job it is to rent space. Ignoring the facts and the truth doesn’t change the facts and the truth.

Do you believe the government and the corporate media, or do you believe your own two eyes?

You can ignore the government reported happy talk. When retailers and restaurants report their actual sales and profits, the truth shall be revealed. It will set you free.

Facebooktwittergoogle_plusredditpinterestlinkedinmail
This entry was posted in General. Bookmark the permalink.
  • jadan

    So what do we do about this, Jim Q? If people had money, Sears would be doing fine, wouldn’t it? It’s been around since 1893! One could say that Sears created American consumerism. The Sears catalog fueled dreams and wiped butts. Seems likely if Sears goes down, the American consumer society will go with it. Is it just about deflation? The so-called recovery began in 2009 when Obama gave out free money. If the government began a serious program to bail out the public as it has been doing with the banks, would business start to hum again, as usual? Would it then keep running on its own? Or are we looking at the end of society as we know it, the end of Our Way Of Life? Grim thoughts for a Sunday morning…..

    • Tom

      jadan: not to go all doomer on you, but not only has civilization since the Industrial Revolution brought the Earth to the current on-going extinction event due to our reliance on fossil fuels (and the now damaged chemistry of the biosphere), our overpopulation and rampant pollution of all kinds (including unprecedented and continuous quantities of radiation) guarantees that our habitat (that we and all other species rely on for food) is being destroyed. We have about a generation left – and it’s all down-hill from here (getting worse and worse each passing year). Try to enjoy the time you have left.

      • jadan

        That may be so. Our way of life may have even less than a generation before it becomes something very different and less desirable than what it is now. I couldn’t say for certain. Ebola could sweep the globe and cull the population by half or more. Don’t think there’s much we can do about that since overpopulation is the root cause of environmental destruction. We are unable to control our own numbers, so nature will inevitably do it because it has to be done. ( If bio-warfare mavens invent killer diseases, that just saves nature the trouble! It is all natural.) We could render this planet uninhabitable for humans for a million years in a total nuclear war. The Pacific Ocean is being killed as we speak, and there are people, occasionally in this forum, who continue to defend and promote nuclear power. Insanity. Insanity is every where one looks. The worst may happen. On the other hand, it doesn’t have to happen. Anybody in touch with themselves knows in their bones there’s disaster ahead. There’s fear and loathing and homicidal madness. What intrigues me is how we might be able to survive the shocks and make our techno-society sustainable. I kind of like it. Will Sears survive the global perturbation? I get shoes at Sears and I sure like that Craftsman lifetime warranty on tools. No, the Mad Max thing is not for me….maybe the last benefit consumer society can give to its American dreamers is a euthanasia pill, something painless and quick so we can get out before Sears goes bankrupt…

  • David McCance

    I have been in retail for a half a century. In all that time i never experienced anything close to the retail sales numbers like now. If you are involved in retail sales you know the government is fabricating the numbers. Sales have NEVER been worse.

  • USA_objector

    JimQ’s analyses on WB are always insightful, frank and compelling. This one was especially spot on. The death of the consumer culture is unfolding before our very eyes.

  • unheilig

    Damn good article JimQ. I work in the Wall Street area (believe me, i wouldn’t if I had a choice) and I was struck by the number of small stores going out of business. Rents doubling or trebling was the common reason. The weird thing is, those properties are still vacant 5-7 years later. The object seems to be for the property tycoons to buy up entire blocks and then built 60-floor apartment buildings where the rents are $3-5,000 per month. Quite why anybody would want to live here is another question altogether… And 13 years after the WTC went down, none of the reconstruction is finished, or even close to being finished. The REAL economy is a train wreck…except for those guys along the Wall.