Retail Sales

The data on retail sales for the 2007 holiday season are out, and it's not pretty. Here's what it looks like:


Kohls--DOWN 11.4%
JCPenney--DOWN 7.5%
The Gap--DOWN 6%
Target--DOWN 5%
Macy's--DOWN 1.1%


And at specialty store:


Hot Topic--DOWN 6.2%
American Eagle Outfitters--DOWN 2%
Abercrombie & Fitch--DOWN 2%

(Data for Sears, K-Mart, Best Buy, and Circuit City, among others, are not available in the New York Times article I'm using, nor in what I could find in the Wall Street Journal.)

The only sort-of bright spot? Wal-Mart, UP 2.4% (excluding gasoline; 2.7% overall).

All of that's without adjusting for inflation, though. The question is: How do we best adjust for inflation?


According to BLS data, the overall CPI rose 4.3% between November 2006 and November 2007 (data for December are not yet available). But, if we want to look at retail sales, and particularly holiday-centered retail sales, the overall CPI is probably not the best measure. After all, it includes food (+4.75%), housing (+3.05%) and energy prices (+6.07% for home energy sources; +37.03% for motor fuels), which are not particularly relevant for figuring out what happened at The Gap. And the prices of services (including, notably, health care services--+4.98%). So what would be relevant for holiday sales? Try these:


Apparel: -0.41%
Video and audio equipment: -0.95%
Sporting goods: -1.04%
Photographic equipment: -3.93%
Toys: -6.14%


Yep, the prices of what would seem to me to be the major categories of holdiay gift-giving all fell between 2006 and 2007, some (photo equipment and toys) by quite a lot. (The unweighted average price decline of these five categories of things is 2.49%.)


Now, for many of the retail chains we might look at (The Gap, Penney's, Abercrombie and Fitch), apparel prices are more relevant and the others are less relevant, but we can take a shot at trying to adjust for inflation, by subtracting the percentage change in price from the percentage changes in sales. If we do that, here's what we get:


Kohls--DOWN 8.9%
JCPenney--DOWN 5.0%
The Gap--DOWN 5.6%
Target--DOWN 2.5%
Macy's--DOWN 0.7%
Hot Topic--DOWN 5.8%
American Eagle Outfitters--DOWN 1.6%
Abercrombie & Fitch--DOWN 1.6%

Wal-Mart--UP 3.7%


(I used a crude adjustment for Kohls, Penney. Target, and Macy's--the average price decline in the group of products of 2.5%; for the other stores, except Wal-Mart, I used the 0.4% decline in apparel prices. For Wal-Mart, I added back in what happened to food prices, since food is a major part of what they do, and so estimated an overall 1.3% decline in prices for Wal-Mart.)


These results still say it was an awful holiday period for major retail chains. To my mind, this makes the chances that we are heading into (or are already in) a recession much greater.