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From Black Friday To White Noise: Why Thanksgiving Sales "Data" Is Biased And Irrelevant

Tyler Durden's picture





 

While the common wisdom, espoused by any and all commission-taking wealth manager looking to up his AUM, is that Black Friday sales (and the anecdotal evidence from self-referential store-owners and CEOs) can tell us about the trend in the economy or they offer some divine extrapolated insight into the year's final sales number. The truth; you can't handle the truth.  As BofAML's Michelle Meyer notes, there is no correlation between total holiday sales and Black Friday sales over the past seven years. In fact, we believe that not only are the early estimates of Black Friday sales insignificant, they can send misleading signals. More fundamentally, Black Friday sales can either signal a
healthy consumer or a desperate one, depending on the state of the
economy. The bottom line is that we advise fading the Black Friday sales reports, but paying attention to the aggregate holiday sales reports.

 

Via BofAML: Black Friday = White Noise

Although not in the spirit of the holiday season, we are going to throw some cold water on some of the hype surrounding Black Friday sales. After the Thanksgiving weekend, the press goes wild reporting on the early estimates of Black Friday sales and its signal about the health of the economy. The argument typically goes as follows: about a third of retail sales occur during the holiday season and since consumer spending is 70% of GDP, Black Friday sales can tell us about the trend in the economy. We disagree. In fact, we believe that not only are the early estimates of Black Friday sales insignificant, they can send misleading signals. Instead of focusing on Black Friday sales, we think it is best to wait for more comprehensive data regarding total holiday sales.

 

 

Biased and irrelevant


We find that Black Friday sales have no correlation with total holiday sales over the past seven years. This is because there is likely a sampling bias from one year to the next as retailers have steadily expanded the amount of time shoppers can receive Black Friday discounts. This is exacerbated by the steady shift toward internet shopping, which is likely difficult to account for. More fundamentally, Black Friday sales can either signal a healthy consumer or a desperate one, depending on the state of the economy. Discounts during the Black Friday period can effectively “pull forward” sales from the rest of the holiday season. In particular, when economic conditions are particularly challenging, shoppers may be more inclined to search for discounts. This could explain the divergence in 2008 where Black Friday sales jumped higher while holiday sales declined.

 

Wait for the aggregate number


While the early read from Black Friday is not informative and at times misleading, the reports of total holiday sales should not be dismissed. There are a number of organizations that report holiday sales on a timely basis, including the National Retail Federation (NRF), ShopperTrak and the International Council of Shopping Centers. In this analysis, we focus on the NRF data since 2000 (the longest history available). We find that the NRF measure of holiday sales has a good correlation with certain components of retail sales.

 

...

 

The bottom line is that we advise fading the Black Friday sales reports, but paying attention to the aggregate holiday sales reports. This is useful as an early read for predicting certain components of retail sales. However, once we have the actual retail sales report, we no longer need to focus on just holiday activity to understand the trend in consumer spending.

 

 


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Wed, 11/28/2012 - 12:36 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The key to this recovery is to see moar "consumers" voicing optimism by purchasing moar loss leaders in greater volume. Profits, schmoffits...losses, schmosses!

Make every day of the week a black (or increasingly likely, red) day for brick & mortar and e-tailers, too! Even GroupOn can win in such a robust environment.

wb7 needs to do one his masterpieces celebrating Black Friday, Cyber Monday, and now, Grey Thursday (is it Grey?), soon.

Wed, 11/28/2012 - 12:48 | Link to Comment Oh regional Indian
Oh regional Indian's picture

I'll bet a lot of the physical goods bought on black friday this year go on ebay/Craigslist for a few dollars moar (for the ones who could not rustle up the animal spirits to participate).

Plus, given that most (all?) of it is C3 (Cheap Chinese Crap)....what is the whoel drama worth? As in Worth worth?

I'll vote fro plain and simple programmed sleeple brainwashed into thinking that a few more inches on this TeeVee is a better life.

The NUMBers don't lie, they just make you comfortably so. ;-)

ori

Wed, 11/28/2012 - 12:56 | Link to Comment NotApplicable
NotApplicable's picture

Okay, while I agree with all of the analysis, I have to wonder if the chart they present isn't itself noise. I would think there would be better measures than comparing YoY% numbers for each category.

Wed, 11/28/2012 - 15:04 | Link to Comment The trend is yo...
The trend is your friend's picture

Cyber Sales were up 20-30% above last year, but the deals were 20-30% better as well.  I bought a 50 inch LG LED tv for 499 and free shipping.  Can someone say margin compression

Wed, 11/28/2012 - 15:08 | Link to Comment TruthInSunshine
TruthInSunshine's picture

As many here have said so often, they'll make up for the per unit losses on volume.

Wed, 11/28/2012 - 13:14 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Well, now that the "uber excitement" is wearing off (same shit, different year: It's ALWAYS spun the same way in terms of initial reporting, then a slowly leaking more realistic but-still-too-optimistic headlines, until final, more accurate data comes in, months later), there's this modern tale of two cities, and even the "better" city is a very sad one:

 

Two Families Show an Uneven Rise in Consumer Confidence

The New York Times

By , CHRISTINA CAPECCHI and CHRISTOPHER MAAG Published: November 27, 2012

Angelina Sam couldn’t afford to celebrate Christmas last year, serving peanut butter, soup and rice for the holiday meal. And she didn’t buy gifts for her husband or 2-year-old son.

But last week, Ms. Sam had already done five rounds of holiday shopping by the time she headed out for Black Friday specials in a suburb of St. Paul.

“The money was not there,” Ms. Sam said of last year. “But this year, I’m very, very confident.”

Americans are feeling better about the economy than they have in four and a half years, data released Tuesday shows. Preliminary consumer confidence results for November by the Conference Board showed an uptick in confidence, with the index rising to a preliminary 73.7, the highest level since February 2008, from 73.1 last month.

Retailers say they are hoping to cash in on that confidence, beginning last weekend with a deluge of discounts and specials meant to draw shoppers into their stores and onto their Web sites.

But while shoppers like Ms. Sam raised hopes that growing confidence might mean increased sales, economists and retail analysts have said many Americans — even some upbeat ones — continue to hold back. Concerns include volatile gasoline prices, the budget deficit and an impasse in Washington over taxation and fiscal policy.

“People are still cautious, and there’s still a lot of uncertainty,” said George R. Cook, professor of business administration at the University of Rochester’s Simon business school.

Recent shopping trips with consumers in regions with particularly high and low consumer confidence suggested some of the challenges retailers are facing. The holiday season is critical to retailers’ profits, and helps increase consumer spending and the overall economy, but while traffic over the Thanksgiving weekend increased, sales in stores fell on that Friday, traditionally the busiest day of the year. And retailers needed to offer steep discounts to draw customers.

While rising confidence seems to move in line with consumption growth, said Amna Asaf, an economist at Capital Economics, “it appears that the small uptick in November’s consumer confidence is unlikely to provide much of a boost to consumer spending. We need to get more certainty about the direction of the fiscal cliff before we can see a marked impact.”

Ms. Sam, the Minnesota shopper, said her economic situation improved significantly over the last year. But things were so tight for Veronica Lynagh, 29, of Columbus, Ohio, that she had put her family on a strict holiday budget. Consumer confidence in the region including Ohio was relatively low, at 62.9 in October, before rising to 76.3 in November.

Ms. Lynagh and her husband, Matt, allotted$700 for the family’s holiday shopping. To help stay focused, Ms. Lynagh created a color-coded spreadsheet to track income and spending.  The couple say they will not buy any presents with credit cards, using debit cards only, and will only buy items on special.

“It would be really stupid to pay full price this season when all the stores have such good deals,” Ms. Lynagh said.

For the Lynaghs, the year has required a series of financial trade-offs. Ms. Lynagh quit her marketing job at The Columbus Dispatch to stay home with their baby, born last December. Mr. Lynagh, 30, a distribution manager at an auto-parts supply company, traded in his Dodge Ram for a Mazda S.U.V. to save $250 a month on gas. They have refinanced their home, saving $200 a month, and begun putting whatever they can into savings.

They are worried about the political environment, they said. “Our government is spending money we don’t have,” said Ms. Lynagh, who is starting a job as a marketing consultant.

While Ms. Lynagh minded their daughter after their Thanksgiving meal, Mr. Lynagh drove to a nearby Toys “R” Us, arriving 15 minutes after midnight. He trotted to the nearest uniformed employee and asked where an item on his list, a Fisher-Price animal farm, was located.

The employee guided him to it, but Mr. Lynagh did not bite.

“It’s on the list, but it’s not on sale,” he said. “If it’s not on sale, I’m not buying it.”

Retailers say they are counting on there being more Ms. Sams out shopping in the coming weeks than Mr. Lynaghs — and more places like St. Paul than Columbus. The region including Minneapolis and St. Paul had the highest consumer confidence in the nation last month, at 88.4, which jumped to 93 in the preliminary November figures.

(Consumer confidence is measured on a scale in which 100 represents the 1985 level of consumer confidence; a reading of 90 and higher indicates confidence, and the highest level on record was 144.7 in 2000.)

***Ms. Sam, a Ghanaian immigrant, was ready for the holiday season, having paid off her $1,000 Visa bill earlier in the year. An energetic shopper, she hurried through five stores in five hours on the Friday after Thanksgiving. She grabbed a $49 Nook e-reader at Target for her brother in Ghana; a $24.99 Disney Cars bike for her son at Kmart; a $6.88 Disney Cinderella watch for her niece at Walmart; and a $49.99 luggage set from Kohl’s for her mother.

[No offense to sentiment, but I know this cold, number-driven, emotionless world of hard retail, costs, warts, profit/loss centers, metrics by square foot, etc., and this is not the stuff of Merry Retail Christmas Numbers, Bitchez. Add these purchases up, consider the MSM tries to spin this shit as actually GOOD, given that it's the stuff of Retailers' horrors, and see where I'm going?]

Every time a cashier told her how much she had saved, she squealed with delight.

***Ms. Sam said it was all made possible by a grueling work schedule. A nurse’s aide, she took a second full-time job this year, adding an eight-to-12 hour evening shift to her schedule. She now works as many as 100 hours a week, for $13 to $15 an hour. (She took Thursday night off, so she could find some deals.) Her husband has a full-time engineering job***

“Sometimes I get tired,” Ms. Sam said, “and that is to be expected, but I want the best for my son. So I have to work hard for him, just so he doesn’t have to work a double job in order to survive.”

Ms. Sam seemed almost mystified by the extra income this year. “This year there are leftovers,” she said. “We can save money and put some into our son’s account. We still have extra money to spend.”

It was not enough extra that Ms. Sam could indulge after buying presents for relatives: she bought nothing for herself. “I don’t think about me,” she said. “I think about my family. If they’re happy, I’m happy.” She added, “Maybe when I’m done shopping, I’ll give Santa my list.”

 

So, the gist is that the Ms. Sams of the world will save retailers this year. While not an overly technical article, nor being even roughly analytical, isn't this the bullshit being propragated at least in the tone and tenor by the authors and publication?

I applaude Ms. Sam (Mrs. Sam?, whatever, it doesn't matter), because she actually seems like a genuinely good person, who cares about her family, working two jobs, for an aggregate income that's probably not much higher than the official poverty line, and it's reported that her husband, who apparently/allegedly has a full time engineering job, but whose income/shopping habits/love of family are conspicuously absent in detailed reporting in this article (how much do full time, employed engineers make on average?), but if the retailers of the this Hopium-Fantastical New Reality are counting on the "Better Off This Year Than Last" Ms. Sam's of the world to save their asses, they're f*cked completely and endlessly.

Wed, 11/28/2012 - 13:16 | Link to Comment chubbar
chubbar's picture

"She grabbed a $49 Nook e-reader" $49 to read nookies? What happened to the good ole days when you  just diddled them to figure out the status? 

Wed, 11/28/2012 - 14:10 | Link to Comment Kinskian
Kinskian's picture

I suspect that Ms. Sam the Ghanaian immigrant is full of shit, but she's a prime example of one of the "new Americans" our ruling class has been recruiting for over 40 years. 

Having climbed her way out of a 3rd world shithole, she's not going to have very high expectations of politicians, bankers or business leaders, and that explains her optimism.

Wed, 11/28/2012 - 14:52 | Link to Comment VisualCSharp
VisualCSharp's picture

Yep. The hidden message is, look, she's working impossibly hard for scraps and is glad to. Shouldn't you be, too? We are to accept the destruction of the middle class the way Ms. Sam has, and be smiling all the way.

Wed, 11/28/2012 - 14:56 | Link to Comment TruthInSunshine
TruthInSunshine's picture

+1

And an extra +1, too.

Ms. Sam is working hard, at two jobs with many hours, for relatively low pay in a BLS Hedonic Quality Adjustment to the CPI (that already excludes food and energy) world, where 94% of her earnings go to food, energy, housing (the basics), but it's better than Ghana.

And no, retailers and e-tailers will find no salvation with the Ms. Sams of this world. Sorry. For Epic Truthiness, listen to a recent, on the mark, Howard Davidowitz dissection of all things retail.

The New American Slogan:  

"America. Hey Now, It's Still Better Than Ghana, Bitchez."

Wed, 11/28/2012 - 12:21 | Link to Comment Shizzmoney
Shizzmoney's picture

"Best Black Friday, Evaaaahhhhhhhhhhhhhhhhhhhh!!!!!!!!!1111"

- MSM

Wed, 11/28/2012 - 12:22 | Link to Comment slaughterer
slaughterer's picture

Message from Mrs. Slaughterer: "Somebody get some meds, slaughterer just passed out in front of his trading station, his limbs twitching, juts as the SPX passed through 1400 and his E-Trade showed this weird, red number (1,456,789.32)."

Wed, 11/28/2012 - 12:37 | Link to Comment fonzannoon
fonzannoon's picture

Hang in there. Obummer is going to drop the hammer when he speaks today. He has everything going his way. I say there is a chance he makes Boner come out bare ass and whacks him thank you sir may i have another style.

Wed, 11/28/2012 - 12:22 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture
In a time of universal deceit, telling the truth is a revolutionary act.

George Orwell
English essayist, novelist, & satirist (1903 - 1950)

Wed, 11/28/2012 - 12:22 | Link to Comment PUD
PUD's picture

Ah, excuse me...sales matter? Am i missing something here? Bonner said a deal is at hand, greece is fixed again, spain is great this time of year and Jim Cramer says buy buy buy! 

Wed, 11/28/2012 - 12:23 | Link to Comment nobusiness
nobusiness's picture

I knew I should have bought one of those 40% off Citidel Algo's on Black Friday!

Wed, 11/28/2012 - 12:23 | Link to Comment BlueCollaredOne
BlueCollaredOne's picture

I went out on black friday because I saw an ad that said girls pants half off.

To my dismay they were talking prices, not the actual articles of clothing. 

 

Wed, 11/28/2012 - 23:51 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Did you pitch a tent, though?

Wed, 11/28/2012 - 12:24 | Link to Comment Skyprince
Skyprince's picture

Say it ain't so!

 

Wed, 11/28/2012 - 12:27 | Link to Comment boogiedown
boogiedown's picture

This is the kind of context the MSM is not giving us, the kind of context I would have liked to have seen in your article the other day bashing poor people on welfare. Some "data" is biased and irrelevant, such as "data" which enthusiastically suggests people will sell their dignity for an extra $340

Wed, 11/28/2012 - 12:27 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Fade to Black

Wed, 11/28/2012 - 12:28 | Link to Comment buzzsaw99
buzzsaw99's picture

any sales money will go to executive bonuses and china

Wed, 11/28/2012 - 16:59 | Link to Comment sessinpo
sessinpo's picture

And that differs from when? And that differs from what other economic system. Are you suggesting that in any other economic model, sales money isn't used on executive bonuses, and I include China?

 

I'm sorry but I picked on your post because you fail to give a better alternative. If you worked for a company and they decided to pay you X millions, would you turn it down? Am I exposing your unethical non logical liberalism, you didn't know you had? And might I add, how much money do you make a year? There might be some ZHs that need you to redistribute your wealth to them.

 

Executive compensation is most often dictated by the Board of Directors which are often voted on by the shareholders. It doesn't always work. Kind of like our process of electing the POTUS.

 

 

Wed, 11/28/2012 - 12:28 | Link to Comment I am Jobe
I am Jobe's picture

Buy more crap, wtf,

Wed, 11/28/2012 - 14:55 | Link to Comment VisualCSharp
VisualCSharp's picture

Exactly. Like Ms. Sam, we shall all strive to spend our last few dollars on worthless shit from China in order to make our loved ones happy. Because, as we all know, the path to happiness is lined by toxic Chinese products. In the past, Ms. Sam would be saving her hard-earned money for a day when even her 100-hour-work-week wasn't enough to pay the bills.

100-to-1 says her husband is actually unemployed and going to college with a massive federal student loan.

Wed, 11/28/2012 - 12:30 | Link to Comment dbomb12
dbomb12's picture

Wait until we find out the correlation between cost of product and profit after sales, I see a dismal outlook not to mention the increase in the already high consumer debt

Wed, 11/28/2012 - 12:31 | Link to Comment Zap Powerz
Zap Powerz's picture

What a bassfucking assward world we live in.

High unemployement.  Inflation increasing. Energy becoming more expensive. Everyone knows taxes are going up next year.  Obamacare is going to cost businesses a significant (and still unknown) amount. Regulations on business are being churned out of Washington DC as fast as possible. We have QEinfinity now.

In other words, there is no positive economic data and there is NO SOLID ECONOMIC FOUNDATION in the USA anymore.

What the fuck are people doing spending money on shit they dont need?!

Wed, 11/28/2012 - 12:35 | Link to Comment I am Jobe
I am Jobe's picture

Amerikan Life- Easily manipulated thur crap crap and more crap. Sheeples just want to shop and want more and more crap to show off. Nothing like inbred fucks

 

Wed, 11/28/2012 - 12:49 | Link to Comment Bawneee Fwank
Bawneee Fwank's picture

It makes them feel accomplished...they do nothing at all or work at some meaningless shit job and purchasing something they dont need gives them a sense of accomplishment...fucking pathetic!

Wed, 11/28/2012 - 13:04 | Link to Comment pods
pods's picture

That's easy, dopamine.

We sure as hell ain't releasing it by other means, and drugs are too taboo for most.

pods

Wed, 11/28/2012 - 12:32 | Link to Comment JustObserving
JustObserving's picture

A corrupt, manipulated market has no correlation with data.  So who cares whether data is right or wrong? It is irrelevant.

Wed, 11/28/2012 - 12:39 | Link to Comment Tsar Pointless
Tsar Pointless's picture

What do we Americans expect to hear from people who only make money if we spend ours?

"There has never been a worse time to buy a home!" - NAR

"Stocks are expensive here!" - CNBC

"This is the worst holiday shopping season ever!" ShopperTrak

"This is the worst comedy ever on teevee!" An NBC Executive talking about 'Guys with Kids'

"Don't try my product!" An infomercial host

If you work for a business reliant upon others to purchase your goods or services in order to make a profit/living, you are a paid shill. I am. I'm just honest enough to admit it.

Propaganda: It isn't just for governments.

Wed, 11/28/2012 - 12:48 | Link to Comment NEOSERF
NEOSERF's picture

Black Friday, Cyber Monday are increasing moving sales forward...Also, how big does the average sale have to be to offset that TV that you are selling for a loss...sales up, margins negative and then no sales until January when everyone again waits for the "after holiday" markdowns...you built this construct, eat it retailers.

Wed, 11/28/2012 - 12:50 | Link to Comment ptoemmes
ptoemmes's picture

The BF headlines and the market ramping algos are correlated right?

I mean if they can ramp on a "Boehner says optomistic..." then....

Wed, 11/28/2012 - 12:52 | Link to Comment Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

The way economists look at the economy sometimes strikes me as a little goofy. 

I don't see that what folks spend over Christmas has much to do with anything but what they won't be able to spend the first few months of next year.

 

When someone takes out a new credit card to get a new giant flatscreen - is that consumer expressing 'confidence' or 'stupidity' and does it depend on if/when they can pay the damn thing off?

 

Staying in a hole deeper and longer is sometimes a good and productive thing.

On the other hand, most times - it ain't.

 

 

Wed, 11/28/2012 - 12:54 | Link to Comment Shizzmoney
Shizzmoney's picture

If you work for a business reliant upon others to purchase your goods or services in order to make a profit/living, you are a paid shill. I am. I'm just honest enough to admit it.

Propaganda: It isn't just for governments.

Brilliant.

My company is directly involved in funding Chinese/Indonesian slave labor.  Yet I won't be able to pull a "Greg smith" until I get the debt ball and chain off my back (which I will by April next year during my great deleveraging).

Most consumers (who also work for Corporate America), feel this way.  We are told we are "free" by our government.....but of course, that's until we are threatened when we need to eat, or when the bills are due.

When do we cross the lexicon however, of when money doesn't matter?  Do we have to lose it all, to lose IT?

Wed, 11/28/2012 - 13:05 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Is that chart in nominal, CPI-adjusted, or real terms (real meaning adjusted for actual inflation)?

Wed, 11/28/2012 - 13:17 | Link to Comment MedicalQuack
MedicalQuack's picture

Spot on here and ZDnet just did a nice video forum on this topic and the woman from T-Mobile was all over it, and honest talking about changing what they were doing with relating the wrong kind of data as well as talking data base preparation.  They dove into the quants a little too on what they do, but it comes back around to credible data and we don't seem to get enough of that but we get all the crap.  If don't want to watch all the video fast forward to 35 minutes to where all the action takes place.  They had a guy from NASA there and Ford as well.  This was a good panel talking about finding "value" in data and doing it right.

http://ducknetweb.blogspot.com/2012/11/big-dataanalytics-if-used-out-of....

Also I added how if this is not done correctly with using analytics this stands to be the biggest abuse against consumers with unfair analytics used to judge and deny.  On tht topic I hope they get someone smart in at the SEC and understand someone had to be a quick fix but the woman will be run over quicklya and trampled as I don't see any tech background there and of course as she gets run over, so do we.  Same applies for HHS secretary, we need a new one there too so let her leave before the real tech fireworks start as they coming right in that agency. 

Wed, 11/28/2012 - 14:48 | Link to Comment q99x2
q99x2's picture

Those lying scoundrels even included me in their crooked statistics and I didn't go shoping.

Wed, 11/28/2012 - 14:56 | Link to Comment payment expert
payment expert's picture

well i address also the aftermath of the holidays those purchases on the black frisay thet never took the ticket off (and will be likely to be returned. and those unfounded return or request of returns from Cyber Monday, that could extent for many months to come.

Data from past years has shown That Cyber monday negative impact for online retailers and service provides reaches between 20-25% on returned goods of penalties "chargebacks" in the following three months.

So realistic numbers from the holiday seasson usually means disasester for the small guy on a bad economy.

Wed, 11/28/2012 - 23:16 | Link to Comment Northern Lights
Northern Lights's picture

Why Thanksgiving Sales "Data" Is Biased And Irrelevant???

Try this....................everyone made their purchases on credit cards.  Not many paid with cash.

I can hardly wait for mid-January, late-February when same people start filing for bankruptcy.

Man it's gonna be bad.  It'll pretty much wipe out any good feelings created by this years' black Friday shopping spree.

 

 

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