Same Store Sales
Something ugly this way comes. As we noted last week, despite proclamations that any weakness in US spending or economic data is merely seasonal or transitory, BofA's credit and debit card spending data revealed that sales were notably weak. Today we get further confirmation of what Retail ETF investors have been seeing for a while as Johnson-Redbook reported a 2.8% plunge in Same-Store-Sales - the worst start to an April since 2005.
Chipotle has had enough of being an e-coli associated Mexican food company: according to Bloomberg, the fast food (and just as fast food poisoning company) may be getting into the burger business. For now, however, the market is less than impressed.
The latest channel checks show that same store sales trends at America's casual dining restaurants - those which cater to the vast majority of the US middle class - have suffered a fourth consecutive month of declines, something not observed since the first financial crisis, sliding a whopping 3% in March.
Forex remains to be the largest market in the world and the least understood. Central banks have more influence on global markets than any other force. In other words, monetary policy is the ONLY economic indicator(s) investors should be watching, because let's face it, if the Fed raised rates to 10% like they should do and called in all that QE money, stocks would collapse.
But yet Forex remains a mystery, something that someone may have mentioned or you heard about.. wait FX is a TV channel? or graphics? a movie?
Since 2005, 44% of retailers, on average, beat their same store estimates each month. In February, only 14.3% did...
If it looks like a recession from so many different angles, chances are very good that it is. It is so consistent that even the stock market has finally awoken. The problem, the real problem, is as Nordstrom’s struggles suggest with inventory – it is only beginning. The OECD, for one, is right to be suddenly alarmed, though, as usual, it would have been far more helpful and relevant last year instead of further fostering the absurd notion of "transitory." Like Bernanke was in his turn, Yellen will be the last to admit it. Sadly for her, she can’t eat the unemployment rate.
- Stocks knocked back as oil rally falters (Reuters)
- Still no deal for Britain on EU reforms after all-night talks (Reuters)
- Oil Falls Near $30 as Rising U.S. Crude Stockpiles Expand Glut (BBG)
- PBOC to Raise Reserve Ratios for Banks That Don't Meet Criteria (BBG)
- China’s Top Securities Regulator to Step Down (WSJ)
The bad news for the company which many thought had "kitchen sinked" all near-term disappointment three months ago was that revenue of $129.7 billion missed expectations by $900 million, that Free Cash Flow declined notably to $15.9 billion for the full year compared to $16.4 billion the year before, that Operating Income continues to drop far faster than revenues, either with or without FX suggesting costs increases are far greater than the offsetting topline and that it slashed guidance on the top-line saying that net sales growth is now "expected to be relatively flat, which compares to the previous estimate for growth of 3 to 4 percent on a constant currency basis."
America's favorite "fast casual" darling is set to hold a kind of ad hoc “try not to poison anyone” meeting on February 8, when all stores will close “for a few hours” so that management can “discuss some of the changes [its] making to enhance food safety, to talk about the restaurant’s role in all of that and to answer questions from employees.”
- China trade surprise brings relief (Reuters)
- Obama knocks Trump, voices optimism (Reuters)
- Republican Candidates Criticize Obama’s State of the Union Address (WSJ)
- Republicans and Democrats Agree: We Hate Wall Street (WSJ)
- Oil rises for first time in eight sessions on China, U.S. stocks draw (Reuters)
- U.S. Exports First Freely Traded Oil in 40 Years (WSJ)
- China Imports Record Crude as Price Crash Accelerates Buying (BBG)
In March 2014 Wall Street’s ex-items S&P 500 earnings forecast for 2015 was about $133 per share; it ended up 20% lower at $106. Yet here they go again - the consensus for 2016 started out at $137 per share last spring, and is just now beginning to make its way back toward the high $120s. It is a barometer of the abject complacency and intellectual sloth that has descended on the casino owing to two decades of Fed coddling and seven year of free money for the carry trades. In the case of Chipotle, it was always just a burrito. In the case of the US and world economy and financial markets, it’s not even that.
The "unexpected" weakness among US consumption, that segment accountable for 70% of US GDP, continues this morning when moments ago Macy's reported a trifecta of weak data, reporting a miss on Q3 sales which came at $5.87 billion below the $6.1 billion expected, and down from the $6.2 billion a year ago, but also a plunge in comparable store sales which tumbled by 3.9%, far worse than the expected drop of -0.4%, and nearly three times as bad as the 1.4% drop a year ago.
As one witty observer noted over the weekend, "no one with an IQ greater than their shoe size, save corrupt, captured American economists, buys the fake October unemployment report," and while we agreed with the pretext of his thesis, we thought a quick sanity check on the sudden surges in Retail employment and Construction jobs and wage growth would help clarify a few things for those who 'believe' in miracles. As the following two simple charts show, we have seen this odious pattern of mal-investment, mis-allocation, and erroneous executuve extrapolation before... and it did not end well.
- Compare: S&P 500 Futures Advance After U.S. Stocks Ignored Global Rally (BBG)
- And contrast: Global Stock Rally Grinds to a Halt (BBG)
- And be very confused: Global Stocks Lower on U.S. Interest Rate Uncertainty (WSJ)
- Hilsenrath: Fed Wavers on September Rate Rise (WSJ)
- Time for more QE: Abe Adviser Says Next Month Good Opportunity for BOJ Easing (BBG)
- Brazil downgraded to junk rating by S&P, deepening woes (Reuters)
- Kiwi dollar tumbles after New Zealand cuts interest rates (Reuters)
What happens when we roll back into the next official recession, unemployment soars, and consumers really stop spending? What is revealed when you look under the hood of this economic recovery is that it is a complete and utter fraud. The recovery is nothing but smoke and mirrors, buoyed by subprime auto debt, really subprime student loan debt, corporate stock buybacks, and Fed financed bubbles in stocks, real estate, and bonds. The four retailers listed below are nothing but zombies, kept alive by the Fed’s ZIRP and QE, as they stumble towards their ultimate deaths. The coming recession will be the knife through their skulls, putting them out of their misery.