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Second Company Admits "It's Not The Weather" - It's The Economy, Stupid

Tyler Durden's picture


On the heels of Wal-Mart's dismissal of the "great" jobs report, The Container Store CEO yesterday explained how Q1 weakness was "not just the weather" but an overall 'funk' in consumer spending. Last night we had a second firm - the much more integrated into the housing recovery, Lumber Liquidators - come out with some heresy about Q2 bounce backs and the weather..."demand strengthened for 30 days beginning in mid-March. But in May demand slowed and further weakened in June. We were somewhat surprised by the magnitude of the continued weakness in the stores designated as impacted by weather in the first quarter." There goes Q2 GDP...


Q2 was worse that Q1!!

As we discussed on our first quarter earnings call customer demand  strengthened for 30 days beginning in mid-March. But in May demand slowed and further weakened in June. We were somewhat surprised by the magnitude of the  continued weakness in the stores designated as impacted by weather in the  first quarter, particularly relative to all other stores.


When weather impacted comparable stores, net sale decreased 12.9% driven by  both a 9.6% decrease in the number of customers invoiced and a 3.3% decrease in the average sale. In all other comparable stores net sales decreased 2.1%, nearly all due to a lower number of customers invoiced.

Forget the idea of "pent-Up" demand - once it's gone, it's gone

The impact that weather can have on a flooring purchase is very different compared to other large ticket purchases. A flooring purchase is generally a large ticket discretionary purchase that most residential homeowners make infrequently. It is disruptive to the household and can be a complex undertaking for the customer. Our research indicates that the average length for the entire process from interest, initial interest to sale is approximately 100 days.


Wood flooring is a product that must acclimate to the house and room before being installed. As a result our customers typically plan well in advance for the inconvenience of removing old flooring and installing new flooring. Once the window of opportunity to complete the flooring purchase has closed finding a new opening in the calendar may be difficult and take some time.


...customers' discretionary, large-ticket home improvement projects is likely to be delayed for some into the fall flooring season, and for others, into spring of 2015.

It's not the weather - it's a macro problem...

Our reduced customer traffic coincides with weakness in certain macroeconomic indicators related to residential remodeling. As most of you are aware existing single-family home sales have been down 6% to 8% each month since November of 2013. We believe the flooring market generally has been weaker in the first portion of the current year as compared to the corresponding period in 2013 resulting in tough comparisons we are experiencing from a housing recovery that has been building since the summer of 2011.

*  *  *

It's not the weather... it's the economy, stupid... and Q2 is not looking so good...

As WSJ adds, a number of [retailers] have warned that their customers are delaying purchases amid economic uncertainty.

Improving weather helped drive mall traffic into June from May, according to Thomson Reuters, which administers an index that tracks retail sales.


[BUT] June is typically a tough month as companies ramp up discounts and promotions to clear through inventory ahead of the back-to-school season.


"That's what's driving the traffic," said BlueFin Research Partners retail analyst Rebecca Duval of the higher promotional levels. "The Fourth of July isn't usually a big shopping holiday, but this year there were big discounts."


Even though sales "are coming in relatively in line or slightly better than expected, it's not without cost, and that cost is lower margins," Ms. Duval warned.

Seems like we are going to need more job cuts and more buybacks.

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Thu, 07/10/2014 - 11:02 | 4943288 Dr. Engali
Dr. Engali's picture

Does this mean we get our daily dose of droning propaganda rebuttal from El Presidente Zero? 

Thu, 07/10/2014 - 11:06 | 4943317 Clint Liquor
Clint Liquor's picture

Time to follow Europe's lead and change GDP to add not only 'intangibles' but Hookers and Blow.

Thu, 07/10/2014 - 11:30 | 4943439 ejmoosa
ejmoosa's picture

Get enough students through school with Common Core, and the new economists will be able to agree on the new GDP numbers with relative ease.

Consensus matters most.

Accuracy does not

Thu, 07/10/2014 - 12:19 | 4943474 TBT or not TBT
TBT or not TBT's picture

With NIRP, we can discount future cash flows with negative rates. We will be infinitely rich in the present, shortly!  Come ooonn Fed.   Bring it. 

Thu, 07/10/2014 - 13:19 | 4944034 Dollarmedes
Dollarmedes's picture

Eagerly awaiting the Q2 initial print:

Will it confirm the recession, or will they release some unbelievable bullshit? It's so exciting!

Thu, 07/10/2014 - 13:56 | 4944184 Freddie
Freddie's picture

Wal MART is an EBT soup line welfare store.  They would be losing money if it wasn't for EBT.

Thu, 07/10/2014 - 15:26 | 4944591 Navymugsy
Navymugsy's picture

Isn't blow an import? What side of the ledger would that go on?

Thu, 07/10/2014 - 11:06 | 4943319 insanelysane
insanelysane's picture

Costco is up 6% due to the cost of fuel which means that the shit has really hit the fan because companies should be reporting growth (actually inflation) in their sales data if people were purchasing the same goods.  The fact that sales are down even though prices are up means that people are really buying less.  I'm sure the professionals and pundits on MSM have a completely different take.  It did take me 5 years to finish engineering school and then I taught myself computer programming so what would I know?

Thu, 07/10/2014 - 11:09 | 4943330 Clint Liquor
Clint Liquor's picture

You should know how to add and subtract, which would put you far ahead of President Urkel.

Thu, 07/10/2014 - 11:11 | 4943339 Ms. Erable
Ms. Erable's picture

But... math is hard. Especially so for politicians.

Thu, 07/10/2014 - 12:34 | 4943745 kchrisc
kchrisc's picture

Math is easy for pols and crats: "2 + 2 is 5 or Room 101?"

Thu, 07/10/2014 - 11:16 | 4943364 junction
junction's picture

Maybe, but for sure tomorrow, Friday, Whole Foods has a one day sale on peak-season cherries for $1.99 lb, save $5.   Now that is a deal.

Thu, 07/10/2014 - 11:22 | 4943403 valley chick
valley chick's picture

Free good food from local farmer is better deal and canning that farmer food is priceless!

Thu, 07/10/2014 - 11:22 | 4943401 slaughterer
slaughterer's picture

Once Europe closes, Kev' can take ES green with some VIX Hulk smashing. 

Thu, 07/10/2014 - 11:52 | 4943547 asking4it2k
asking4it2k's picture

The US trade deficit is still massive and near all time highs. You cannot have a healthy economy when you dont make anything. Until trade is more balanced the US economy will never recover.


Its amazing how many ivy league "experts" economists fail to see this.

Thu, 07/10/2014 - 15:22 | 4944566 GreatUncle
GreatUncle's picture

THe ivy league experts do not take into account all the dollars being created then run aroiund telling everyone we have a trillion dollars in the bank (the fed just created).

Thu, 07/10/2014 - 13:12 | 4943991 Dr. Everett V. Scott
Dr. Everett V. Scott's picture



I blame global warming.

~ Prez 0.

Thu, 07/10/2014 - 11:02 | 4943289 El Hosel
El Hosel's picture

Two dead flys in the punch bowl... yummy

Thu, 07/10/2014 - 11:03 | 4943296 I am more equal...
I am more equal than others's picture



The Economy is Stupid.  Barrack Obama

Thu, 07/10/2014 - 11:03 | 4943299 buzzsaw99
buzzsaw99's picture

this too, is bullish

Thu, 07/10/2014 - 11:05 | 4943311 souljaboy
souljaboy's picture

I'm floored.

Thu, 07/10/2014 - 11:06 | 4943312 Calculus99
Calculus99's picture

They should lock this CEO up in a 're-education camp' because he's getting the truth mixed up with the un-truth.

Get with the program buddy because un-truths are the new truths these days, everywhere from Wall Street to the halls of DC.

Thu, 07/10/2014 - 13:44 | 4944132 BeerMe
BeerMe's picture

To your local city council.

I no longer feel that I'm surrounded by morons.  I know it.

Thu, 07/10/2014 - 11:09 | 4943316 Australian Economist
Australian Economist's picture

Don't worry, Q2 GDP will come in at +0.1% so no recession here.


Even if it gets revised down to -2.5% a couple of days later mission accomplished would have been declared, so it's too late by then. 

Thu, 07/10/2014 - 13:45 | 4944137 BeerMe
BeerMe's picture

What would that headline look like?

Economy rebounds from Q1?  Economy expodes upwards from Q1?  We have reached escape velocity?

Thu, 07/10/2014 - 15:18 | 4944550 GreatUncle
GreatUncle's picture


Escape velocity is 3%+ anything less is a fail. So quoting 0.3% revising to 1%?

Still a fail though as you missed escape velocity and burn up as you fall to earth.

Thu, 07/10/2014 - 15:25 | 4944579 Navymugsy
Navymugsy's picture

Is the Australian School of economics akin to the Austrian school except with more beer and seafood?

Thu, 07/10/2014 - 11:09 | 4943328 Smiley
Smiley's picture

New theme song at the IRS:

We're making a list
Checking it twice
Gonna find out
Who's naughty and nice

Toe the line or get an AUDIT

Thu, 07/10/2014 - 11:11 | 4943337 Squid Viscous
Squid Viscous's picture

it's ok, Q3 is gonna be a doozy, back-to-school etc

Thu, 07/10/2014 - 11:37 | 4943477 Seasmoke
Seasmoke's picture

It sure is. Even though we pay over $10,000 @ year in property taxes. We just received a letter a mile long, asking/telling us all the things in supplies our children need to buy fir upcoming school year. WTF !!!

Thu, 07/10/2014 - 12:52 | 4943872 SheepDog-One
SheepDog-One's picture

Yea, my brother was telling me his daughters school sent him a list of required items to attend class, one of them was an Apple Airbook, only starting at around $1,600, and this is for starting 10th grade!

Thu, 07/10/2014 - 13:43 | 4944127 crazybob369
crazybob369's picture

All you have to ask is why does it cost the Gov 11-15K to sent a kid to school while a much better private school education costs about 8-9K.

Thu, 07/10/2014 - 12:54 | 4943891 kchrisc
kchrisc's picture

Had a conversation with an obviously liberal teacher of my son's a few years ago. That typical squeamish white-woman type who seems hell bent to make the world pay for her issues with her father.

I asked why we had to buy school supplies and pay for a book or two when I and our neighbors pay pays thousands a year in “taxes.” “Could not the school provide them?"

She said that then the quality might not be "so good," blah, blah blah. I asked why the quality might not be “so good.” She fell for the trap and said that, "Government 'things' tend to not be so good." So I asked her, "Doesn't that apply to government supplied education as well?"

She was less than pleased and politely excused herself so as to go and ctrl-alt-del her locked up head I presumed. LOL


"Caution: Logic in Use"

Thu, 07/10/2014 - 11:12 | 4943340 MFL8240
MFL8240's picture

Doesn't matter what it is, it is Bush's fault!

Thu, 07/10/2014 - 11:11 | 4943343 youngman
youngman's picture

Sounds like they need to buy back a bunch of shares....that is how you make money these days...

Thu, 07/10/2014 - 11:11 | 4943346 foodstampbarry
foodstampbarry's picture

Blaming anything other than the weather is rayciss.

Thu, 07/10/2014 - 11:12 | 4943348 MountainsRoam
MountainsRoam's picture

Today has got to be the peak of rigged fraud in the markets?? 

Thu, 07/10/2014 - 11:18 | 4943380 Ms. Erable
Ms. Erable's picture

You write as if you believe fraud and depravity have finite limits.

Thu, 07/10/2014 - 14:01 | 4944209 Chuck Knoblauch
Chuck Knoblauch's picture

Fraud is like an ice covered mountaintop.

When it melts, it turns into flowing rivers of depravity.

The circle of life.

Thu, 07/10/2014 - 11:24 | 4943414 ptoemmes
ptoemmes's picture

Just like the great recession never ended, weather also never ends.

To borrow from the inscription found on the General Post Office in New York City at 8th Avenue and 33rd Street.

Neither snow nor rain nor heat nor gloom of night stays these results from messing with Goldman's Q2 GDP estimates.


Thu, 07/10/2014 - 11:32 | 4943455 Bankster Kibble
Bankster Kibble's picture

Er, it may also be "glom of nit" per Terry Pratchett.

(sorry, off topic, you may now resume your regularly scheduled programming)

Thu, 07/10/2014 - 11:25 | 4943421 GrinandBearit
GrinandBearit's picture

Is this suprising?... of course not.

ALL government stats have been nothing but blatant lies for years and years.


Thu, 07/10/2014 - 11:29 | 4943436 oklaboy
oklaboy's picture

Let's start the bidding at -1.5, do I hear -1.5.... I have -1.5, do her 1.7,1.7 is the call, yes you there in the GS shirt, do I have -1.7?.... I have -1.7, now asking  -1.9 

Thu, 07/10/2014 - 11:42 | 4943514 KidHorn
KidHorn's picture

Lumber Liquidators is a crappy company. It is loaded with bad reviews online. My only experience with them was I ordered some flooring and a month later they lost track of it. I couldn't even cancel the order since they couldn't find it on their system. They had no problem charging me. I had to email them my receipt to prove I made the order and they did credit me back.

Thu, 07/10/2014 - 11:50 | 4943538 Atomizer
Atomizer's picture

My concerns about telling your shareholders that the government EBT is not working. What do you plan on doing?  Repurchase your stock like the the rest of the cunt licking corporations that prend to operate under capitalism? You're fucking done. 

Small enterprising businesses have more value.  Take a baseball bat to the jew screaming in the background. Explain how monopolies don't work. If he starts screaming again, club him with the bat. 

Thu, 07/10/2014 - 12:02 | 4943595 orangegeek
orangegeek's picture

Quoted from above:  Q2 was worse that Q1!!





Thu, 07/10/2014 - 12:14 | 4943652 AcidRastaHead
AcidRastaHead's picture

So much funk, so little George Clinton

Thu, 07/10/2014 - 12:28 | 4943715 sbenard
sbenard's picture

Who needs an economy? Who needs jobs? Who needs reality? We have PRINTED prosperity now!

Thu, 07/10/2014 - 12:43 | 4943809 SheepDog-One
SheepDog-One's picture

The central planstering isn't working out so well? Gee, who could have seen that one coming?

Thu, 07/10/2014 - 13:39 | 4944110 crazybob369
crazybob369's picture

Wow!!! These guys are smart. No wonder they're CEO's. They figured this out all by themselves. Give 'em bonuses.

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