"Something Snapped": US Department Store Sales Crash Most On Record

Tyler Durden's picture

As we first documented last week in "Mega-Bears Smell Blood As Mall REITs Tumble" and as Bloomberg followed up yesterday, looking at CMBS on the Mall REIT space, many have set their sights on mall REITs as the "next big short." However, an obvious question that has emerged is whether it is too late to go all in on this particular short, or whether as some have suggested, the bottom is in.  “The short feels crowded to us,” said Matthew Weinstein, principal at Axonic Capital, a hedge fund that specializes in structured products. “If these defaults start happening soon, the short will work, but if the defaults do not occur quickly, the first guy out could drive the market meaningfully higher.”

On the other hand, one particular chart revealed in the latest monthly Bank of America debit and credit card spending report shows that things may be about to get a whole lot worse for America's department stores, as well as malls where they are for the most part the anchor tenants. Of note: while official US retail sales data will be released tomorrow (BofA data always comes several days ahead of the official release), what is especially ominous is that the collapse in department store spending was the biggest on record.

The collapse in department store spending in February took place in the context of broad weakness across the entire retail universe, with BofA reported that retail sales ex auto declined 0.2% seasonally adjusted. Since that was not accepetable, BofA decided to smooth out large swings over the prior two months, leaving it with retail sales ex-autos running at an average 3 month pace of 0.1% mom SA. As the chart below shows, even that suggests a far weaker than expected retail sales report tomorrow, just hours before the Fed's rate hike announcement: "Given that the BAC data trends closely with the Census Bureau, we think our data points to a soft report when it is released on Wednesday the 15th."

Breaking down the headline number into components shows a notable decline across virtually all subsegments, with the exception of Cruise Ships (clearly not a concern for much of middle-class America), Home improvement stores and Home goods. Everything else was flat to down substantially.

 

To be sure, Bank of America tries to explain the sudden February weakness with the previously documented delay in tax refunds, although that hypothesis does not conform with last week's Gallup survey according to which February Consumer spending was the highest since 2008. This is what BofA says: "We believe that a delay in tax refunds likely biased spending lower in February relative to prior years.

Comparing debit and credit card spend is a good indication since presumably usage of debit cards should be more sensitive to the tax refund (proxy for cash) than credit cards (leverage). Indeed, we found that retail sales ex-autos for debit cards declined 1.7% mom while credit card spending was up 1.8% mom. The second test we looked at was by income cohort -- the tax changes are more likely to impact the lower income households given that the EITC and ACTC are aimed at assisting lower-income households. We see this clearly in our data where the lowest income quintile reduced spending by 3.4% while the highest income quintile actually increased spending by 0.9% mom. We combine these two factors in the Chart of the Month to show weaker debit card spending, particularly for lower income households.

Alas, even if one believes this explanation, the next charts below show that no matter what - if anything - prompted the February spending collapse, when it comes to secular trends across various key spending segments, the deterioration has been taking place for years. First looking at restaurant sales, there has been a decisive slowing in spending at restaurants over the past two years with weakness concentrated in the larger / chain restaurants.

The same is obvious in the chart showing spending on "food service and drinking places"...

... as well as spending at food and beverage stores, as well as luxury designer goods, all of which are plunging.

And while we await tomorrow's government data, all appropriately seasonally adjusted to eliminate outlier data points, two things become clear from the charts above: the pervasive consumption weakness, which only accelerated recently, shows that the retail weakness is far more profound that can be merely explained with "everyone is shifting to Amazon", and more importantly, the US consumer continues to retrench with every passing month, spending less on discretionary products as well as traditional pastimes as eating out, or aspirational purchases like luxury goods.

As for what it was that "snapped" in department stores, we may need a "bigger short" soon, should the recent trend be indicative of just how bad things truly are.

Source: Bank of America

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small axe's picture

what part of "no one has any money" don't they understand?

Belrev's picture

I suspect that people are boycotting the anti-Trump department stores and buying directly from Ivanka.com

Logan 5's picture
Logan 5 (not verified) Belrev Mar 14, 2017 3:53 PM

Bad decisions by their purchasing managers...

 

They shoulda stocked their shelves with GRAPE DRINK.

NugginFuts's picture

pronounced: GRAPE DRANK. As in, "I drank this purple shizzle then got shot by George Zizzle."

kliguy38's picture

Just use your "Buy Shit" app.........it'll all be great

AnonymousCitizen's picture

I honestly do not remember the last time I went to a "department store". Amazon, Craigslist, eBay...long UPS and FedEX.

nope-1004's picture

No kidding.  It's actually cheaper for me to buy something online in the next city and have it drop shipped to my door than me hop in my vehicle and head on down to the empty mall.

 

CheapBastard's picture

8 years of Soweeto's jobless recovery----what'dya expect?

Zorba's idea's picture

This trend is the inevitable consequence for squeezing the middle class over the past few decades...the middle class "turkey shoot" is winding down. With emerging comsumer trends after decades of stuffing our closets, attics, garages, and rented storages,...comes Garage sales, Yard sales, St vincent De paul stores in every abandoned "grey mall". Foodservice cost inflation will continue to sink growth in this crowded segment as more households are compelled/inspired to cook in their own kitchens with non traditional sourced foods, while backyard BBQ/netflix drives the recreational/entertainment trend. As America continues to adapt to the elites Less is More modern economic reality, perhaps we'll rediscover our ancestors resolve to being self reliant and create more mutually equitable ways of collaborating our efforts to support our families and communities. Lastly, these forces of change may possibly enable adapters to solve how to do More with less across broader segments of our consumer based economy until the elites consume themselves. 

John Law Lives's picture

"Trends? What Trends?" - xythras the spam dildo

How about you start a new new trend of not posting your FVCKING spam on this site.

xythras's picture
xythras (not verified) John Law Lives Mar 14, 2017 7:32 PM

How about I poke you a new spam hole with my magic dildo? Bring your mom also. Wanker !

John Law Lives's picture

How about you treat this site and its members with respect and hawk your wares somewhere else.  Fight Club doesn't tolerate moronicity.

Inzidious's picture

Actually they do? xythras spams every post and nothing ever happens? Maybe he IS paying for advertising =]

John Law Lives's picture

I used the term, "Fight Club", to refer to the body of ZH members, not the ZH administrator(s).  Anyhow, maybe xythras is paying ZH.

Zorba's idea's picture

True, Trends from the "pre-medicated" market era are long gone. Today's market trend is a bit simpler to follow and Janet has been kind enough to let us know she really really is intent on rubbing out some 50 to 75 bips. Has the market priced this in? Count on it! Why? The FED is the first and last buyer of recourse given all the skin they have in the game. Most of Main street's skin is chasing their monthlys. Thus, the market is to some extent a circle jerk for the elites to play musical chairs amongst themselves. Fuck em. I'll consider becoming a buyer only after at least, a fifty% correction, the minimum correction to incinerate the mountain of toxic assets in this FED faux market.

Sector Catalyst's picture

"We buy shit we don't need, with money we don't have."

- Tyler.D

Zorba's idea's picture

Tyler might consider a past tense for that statement..its past time to start gathering acorns.

Freddie's picture

I weny into Sears a few years ago and came to the conclusion that Sears and the rest are for an America that no longer exists.  An America that started going away in the late 1970s.

Odlly, the place was filled with Mexicans as they are more old American middle class cause they work for cash and get free housing, healthcare, food stamps, soc secuity, free education and more.  They have the disposable income that the white middle class used to have. 

Zorba's idea's picture

..my most sobering moment at Sears a few years ago was realizing much of their iconic Craftsman brand was offshored...mostly in china.

BryanM's picture

The only places I shop locally regularly anymore are Costco, Sams and Home Depot. Everything else I buy online.

CJgipper's picture

I bought new dress shoes and a belt last week.  Last year, I bought 4 suits.  

 

They're selling stuff that people just don't need.  That's the issue.

lil dirtball's picture

Salvation Army stores are beating expectations and YoY sales.

Zorba's idea's picture

Salvation is a growing enterprise...thanks Barry

max2205's picture

I hate being around people so I don't go to the malls 

CPL's picture

Probably won't be finding many people there.  The H1N1 they built a couple of years ago has long since mutated thanks to time, nature and fukushima into a chimera virus that is no longer a bird killer, it's not picky anymore.  It's got so bad the Emergency Response maps that actually track changes have given it it's own map.

http://hisz.rsoe.hu/alertmap/birdflu_monitor.php

http://hisz.rsoe.hu/alertmap/index2.php

It was made in lab btw.  Here's the patent for it if anyone is curious.

http://www.google.com/patents/US8835624

Yes...they've all accidentally killed themselves by way of murphy's law.  The sales drop off is a dead customer base no longer responsive.  This isn't the first time btw.  The black plague knocked the world population back.  That however had an 'off' switch called willow bark.  This one doesn't and it seems to mutate really fast.

Jon Bong Jovi's picture

It's too late to jump in on this short, by the time it's in the press it's too late.  Besides what are the odds the bank will actually foreclose? What the fuck is a bank going to do with a 3rd or 2nd tier mall? 200k sq. ft out in Podunk Flyover Town, Middle America USA? Run it further into the ground? Pay property tax, maintenance, leasing fees, management fees until it sells or leases up. Remarket it as a car showroom or indoor theme park? They'll be zombie malls.

The banks will rework the debt, extend and pretend until the next cycle comes and unload then.

espirit's picture

Water and Blood seek their same respective levels.

It's a Bloodbath, Bitchez.

eatthebanksters's picture

The 'Ivanka effect'.  People are saying fuck you to the likes of Nordstroms...good!!

Freddie's picture

I loathes retailers Target - Dayton famiiy D Gov of Minnesoata who told white Minnesotians that if they did not like more Somalis floodining into MN that they can leave.F Macys and also Amazon.  The one decent retailer who takes boycoin and is libertarian is Overstock.com.

I like Trump but his kids sold out to the zio gang.

GUS100CORRINA's picture

We just found the next "BLACK SWAN" event.

CRASH OF REIT Index

Why?: America is BROKE and everyone knows it, but there is nothing anyone can do about it!!!!

It will take time and the implementation of sound fiscal and monetary policy to fix!

END THE FED!

TahoeBilly2012's picture

Starbucks in Grass Valley CA is being boycotted by local law enforcement and CHP!! Heard it from a well placed local business man this morning. He said he is embarrassed he still goes there, cause he meets friends.

Freddie's picture

Starbucks are shit company but CA cops and CHP are golden pension scum bags.,

SixIsNinE's picture

there is something to be done -  zh had a post recently that will remove big bad credit items off CONSUMERS credit rating scores -

thereby freeing up millions more debt to issue.

 

there. 

Fixed.

next,  just do a 700 reset on everybody below 650 and offer a new round of Ninjas.

everybody that is 790 and above will be docked 50 points, because Obama.   gotta be fair y'all.

 

 

 

BryanM's picture

I just saw a Democrat congressman say we are the richest country on earth so everyone should get health care. I thought...is he smoking crack? We are in debt a conservative 20T. I'm not going to argue about health care but we are a debtor nation.  When will these morons that keep getting re-elected be held to account? I say we need to be able to claw back money from bureaucrats whose past decisions have ruined this country. 

Colonel Klink's picture

You beat me to the comment.  Trumpsters are boycotting those stores against him.  The liberal nutjobs are boycotting those for him.

vealparm's picture

I agree with you Colonel but I also think people are waking up to the fact they really do need not any more Chinese shit.............plus the poor and middle class have no money.

J J Pettigrew's picture

Arent you a Goldman partner?

Reichstag Fire Dept.'s picture

LOL!!! Thanks for giving me a new smart-ass remark!! I'm putting that directly into my "heavy rotation" list of smart-ass remarks!

Reichstag Fire Dept.'s picture

LOL!!! Thanks for giving me a new smart-ass remark!! I'm putting that directly into my "heavy rotation" list of smart-ass remarks!

venturen's picture

The 1% took all the money

Rubicon727's picture

"what part of "no one has any money" don't they understand?"

Duh! Part-time, low wage, temporary jobs while the wealthy only grow even more filthy rich.

Went into Nordstroms the other day. Saw a fashionable cotton blouse: $285.00. Are you frickin' kidding me????

In many banks throughout the nation, the teller you see one week; a few weeks later they are gone.

But the worst dilemma are many MILLIONS of Americans who are financially/economically ILLITERATE. If we had a fully functioning, well educated society, we'd be after the scalps of people like Gates, Soros, Dimon, Goldman Sachs Executives, and....whose that grandfatherly bastard that's worth about $$80 MILLION.

Lex_Luthor's picture

It's the harsh winter, you dummy!

rockstone's picture

And "all of their cards are maxed....."

zagzigga's picture

Yup - none left after paying a huge ransom for housing every month. Thank you Bernanke and other Fed thieves for reflating the asset bubble for your well heeled buddies and ruining things for everyone else!

FreeShitter's picture

I'll say it again....niggas are broke these days. All types of niggas.

mtndds's picture

Meh, TRANSITORY, right Janet Yellen?

JonNadler's picture

broke? what broke, no job, no credit we finance

CJgipper's picture

No, those guys have money.  The ones with jobs are the broke ones - no gubmint bennies.