Chain-Store Stock Carnage Continues (Despite Biggest Jump In Retail Sales Since 2016)

Tyler Durden's picture

Oh the irony - as bulls celebrate the best jump in retail sales since 2016, the scene for retailer stocks is an utter bloodbath...

Earlier today, US Retail Sales in July rebounded dramatically to a 0.6% MoM gain - the most since Dec 2016 - driven a surge in motor vehicles (record incentives) and department stores (more inventives?). Year-over-year saw upward revisions and a rebound to a 4.2% rise in July.

The last two month's declines in Retail Sales have been revised away magically and we have now gone 5 months without a decline...

 

But one glimpse at the carnage in chain-store stocks tells a very different story... Following a week of disappointing earnings from J.C. Penney Co. and Macy’s Inc., the drumbeat resumed Tuesday as results from Advance Auto Parts Inc., Coach Inc. and Dick’s Sporting Goods Inc. sent their shares crashing...

 

As Bloomberg notes, at this rate, the group is poised for the worst annual decline in share prices since the financial crisis.

“Everybody is being burned in retail and people are just questioning, ‘Is there any place that’s Amazon-free?’” Gary Bradshaw, a Dallas-based fund manager for Hodges Capital Management Inc., said by phone.

 

“There will be some winners in retail but boy, it’s just a land mine."

However, Vitaliy Katsenelson more accurately states It’s not just Amazon’s fault. Changing consumer habits are killing old retail biz...

Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter.

 

Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5 percent of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5 percent of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.

 

Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones. Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones.

 

Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes.

 

But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3 percent of that figure is almost $100 billion.

 

Then there are soft, hard-to-quantify factors. Millennials and millennial-want-to-be generations (speaking for myself here) don’t really care about clothes as much as we may have 10 years ago.

 

All this brings us to a hard and sad reality: The U.S. is over-retailed. We simply have too many stores. Americans have four or five times more square footage per capita than other developed countries. This bloated square footage was created for a different consumer, the one who in in the ’90s and ’00s was borrowing money against her house and spending it at her local shopping mall.

But the bottom line, as we noted previously, is that America's malls, retail stores, and fast-food restaurants are hugely overbuilt.

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Bill of Rights's picture

I see plenty of foot traffic, and plenty of stores closing as well. Ya cant have retail if your closing the dam stores.

1033eruth's picture

Anybody believe this from the article:

The last two month's declines in Retail Sales have been revised away magically and we have now gone 5 months without a decline...

I don't know how much money is getting sucked up via the Obamacare disaster, but I would think that would displace a UUUUGGGEE amount of retail sales.

Maybe its people assuming more and more debt because they are falling for the propaganda that our economy is booming and the future is bright.  (see article just below this one about household debt hitting an all time high)


JRobby's picture

The numbers are all made up. The earnings are non - GAAP. The financial and economic news is all a scripted story.

BUY MOAR STAWKS !!!!!

Handful of Dust's picture

When I want to know the weather I look out the window instead of the BS on TV.

When I want to know the truth about retail I take a walk in the mall and count the number of people actually buying stuff as well as take a look at the return line. Also take a notice of how many have credit cards rejected and have to pay cash.

Despite all time market highs, retail and energy sectors are in yuuuge trouble.

The upper 1% are doing great but the others not so good.

Ben A Drill's picture

Food stamps are over built.
Home prices are over the top
Rents are over the top
Wages flat

What we have here is over population to the MAX.

Traffic that once took 35 min. to get to work now takes 1 hr 15min. Just so I can clock in on time.

With construction and accidents happening daily. My commute sucks. Big time both ways.

BandGap's picture

America has the space and the resources, what we have are a lot of unproductive people. Whether this is of their own doing or as part of some master plan has yet to be seen, but there are a lot of lazy-assed people sitting around picking their asses.

 

 

ElTerco's picture

People want to be treated fairly and with respect. Not happening in the modern workplace. There are throngs of bosses but few, if any, true leaders. Some people who were previously leaders have bailed due to looking around at work and feeling like they are characters in the book Atlas Shrugged.

samsara's picture

It's called  OVERSHOOT in the natural sciences.

 

Here's the graph of what will happen to the human pop over the next 20-30 years

 

The Introduction, Increase, and Crash of Reindeer on St. Matthew Island
cynicalskeptic's picture

TPTB have a solution  - depopulation.  In the past a nation or empire's power and wealth were proportional to the number of people it controlled - the size of its army, the amount of food it could produce - people matttered as resources (even if only slaves or serfs).  After the Industrial Revolution, mechanizaton meant more goods and food could be produced with fewer people, technology meant more powerful weapons.  People were still 'valuable' but their role as CONSUMERS was as important as their role producing and serving.   Now - withmore and more people - in a world of limited resources and highly automated means of production, too few people are earning enough to consume - most do so only by incurring debt.   A large number of people are ill prepared for work in an advancedd society and earning too little to consume what that society produces.   TPTB view a large proportion of the world as 'useless eaters' and would love to cull the herd.

I suspect that some catastrophe is on the way - one that will do damage to the planet on a level not seen in remembered history.  TPTB have looted the planet to prepare their own shelters leaving most to perish.   Hence there is no desire to 'fix' anything.  All will be moot.  Survival is the only concern of the 'elites' and their minions.  Their plan is to simply survive and then rebuild on THEIR terms, in full control of the reborn Earth.  The do not care if most perish - and indeed welcome the opportunity to start again.  Quoting Brezhinski - it is easier to kill a million people than control them.  If upcoming events do not kill off the billions expected, TPTB will be more likely to hasten the demise of the unexpected survivors than help them survive the aftermath.

 

Chuck Walla's picture

You mean those Georgia Guidestones are a warning and not advice?

gregga777's picture

The pharmaceutical Crony Capitalist CONporations have been jacking up prescription drug prices yearly at double digit rates, minimum. The Epi-Pen was developed for the United States Armed Forces using tax payer funds. Each one costs at most $5 to produce and a pair of them costs $600 at the pharmacy. That's just one example out of thousands. That's one sector that's taking enormous sums of money out our pockets by force.

Bill of Rights's picture

Being ill is now a tax, and lord knows we have plenty of future ill, so many Obese people out there nothing shocks me these days,

Dirtnapper's picture

Wait to you see what this Winter is like, future Obesity will be a thing of the past for poor people because they can't afford the food anymore.

Dead Indiana Sky's picture

The blubber bouncing around on most of these whales I see will last them multiple seasons.  They're good for a while.

Bernie Madolf's picture

Is it wrong to charge more for healthcare to obese or unhealthy people (by choice)?

How about making someone buy two airplanes seats so they don't take up 1/2 yours?

Fuck that, we all make decisions. Why should I pay for your bad decisions? I don't expect you to pay for mine

Last of the Middle Class's picture

Trump hasn't scratched the surface of what these companies have done.

RedBaron616's picture

And he won't do anything either, except Tweet about it. A lot of good that does. Someone PLEASE take away his Twitter account!

gregga777's picture

You ain't seen nothing yet. Just wait until the carnage overtakes the CMBS based on these retail operations. It's going to an epic fail.

Peacefulwarrior's picture

"We simply have too many stores"

Retail chains are trying to keep their necks above the waterline in a very deflationary environment. A bit of Hell on Earth.

RedBaron616's picture

Deflationary? What prices are going down? Where?

The problem is that the retailers have driven down the quality of their product until some of us won't buy them anymore. I used to buy a lot of my clothes at JC Penney. No more. They have knocked down the quality of their clothing to the point where I don't much care to go there anymore.

People will pay for quality. For junk, we want the cheapest price ever. Also, how about some decent service? Is that too much to ask for?

Pernicious Gold Phallusy's picture

Crap quality, poor service, long lines for checkout. You can have any two.

aliens is here's picture

YES! Macy's is on the list. I hate that store staffed with 3rd word judgmental trash employees.

Handful of Dust's picture

On the bright side, you no longer need to visit Mexico City, Somalia, India or Bangladesh! Obama brought them to you!!

cynicalskeptic's picture

The goal of TPTB has been to LOWER standards of living world-wide to a common denominator - subsistence level.   We are reverting to the past where a few very wealthy rule over and control a vast population of slaves or serfs.

DEMIZEN's picture

wake me up when it finally affect retail space and commercial real estate.

CRM114's picture

Sales are up because discounting is huge. After two house moves and garage sales, I am now buying a lot of things I bought 7 years ago, stuff like screwdriver sets and table saws, pots and pans, bed linen. About half of them are the same price, a quarter about 5% higher, and a quarter about 30% less. And it's the most expensive items that are cheaper. Lumber is up significantly, as is food.

This sales rise can't last beyond the end of the year because the margins are gone keeping sales up.