Reuters Business Report
Which Retail Sales Data Is Right??
Saturday September 14, 7:16 am ET
By Angela Moore
NEW YORK (Reuters) - Is somebody out there using fuzzy math?
Retail sales figures for August released on Friday by the U.S. Commerce Department painted a picture of an economy being lifted by consumer spending. But, just last week, retail companies issued same-store sales data, also for August, that were weak and seemed to contradict the government data.
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The disparity left market watchers scratching their heads this morning -- especially when placing bets their on how the stock market would react.
Retail sales figures measured by the government rose 0.8 percent in August, down from increases of 1.1 percent in July and 1.4 percent in June, the Commerce Department said . To economists, the data signal the consumer sector -- which drives two-thirds of economic growth -- is still thriving even as the rest of the economy struggles.
The bullish mood, however, seems at odds with many retailers who have posted dismal same-store sales, frequently below expectations, and warning of a disappointing second half. Lehman Brothers softline retail index, which measures same-store sales, was down 1.4 percent in August .
Comparable, or same-store, sales measure sales at locations open at least a year and analysts see it as a key measurement of a retailer's health.
WIDER MEASURE
"Same-store is exactly what it says: same stores. It's not conclusive, it's not the total universe," said Rosalind Wells, chief economist with the National Retail Federation, a trade association. "When I do industry forecasts I never use same-store sales ... I look at total sales, that's what the government looks at."
To be sure, the government data cast a much wider net than is reflected in company same-store sales, and the information is revised twice more, sometimes substantially.
"Different things are being measured," said Michael Niemira, an economist with Bank of Tokyo-Mitsubishi. "Part is coverage, the government uses a true calendar month estimate as opposed to the (retail) industry that does it in four- and five-week periods, and the government data include privately held stores."
The news was good for retailers overall, with the Standard & Poor's Retailing Index (^GSPMS - News) rising 2.8 percent.
BIG TICKET ITEMS
August same-store sales were hurt most by soft sales of discretionary items like apparel, but consumers have been buying big-ticket items -- like cars -- thanks to low or zero-interest rate financing, with car and home sales boosting overall consumer spending.
Excluding automobiles, retail sales rose 0.4 percent after a 0.2 percent increase in July and a 0.4 percent rise in June, the Commerce Department said.
Auto manufacturers posted strong August sales buoyed by financing promotions. General Motors Co. (NYSE:GM - News) said sales grew a staggering 18.2 percent versus the same month last year.
Clothing and accessory sales were weak, the government said, falling 0.3 percent in August after a 1.1 percent drop in July. This backs up what retailers reported. On average,
August same-store sales grew 1.6 percent, compared to a 3.6 percent increase a year ago, according to Bank of Tokyo-Mitsubishi.
Even discounters, which have strong same-store sales, posted lackluster results for August.
Wal-Mart Stores (NYSE:WMT - News), the world's No. 1 retailer posted same-store sales for August below expectations, and Target Corp.'s (NYSE:TGT - News) same-store sales were also below plan.
COUCHES AND TRASH COMPACTORS
One disconnect is in furniture and appliances.
Furniture sales grew 1.7 percent in August following a 0.7 percent drop in July, something analysts attribute to the high rate of home sales. But the bullish figures don't resonate with what retailers are feeling.
In August, home appliance maker Maytag Corp. (NYSE:MYG - News) laid off 400 people who make refrigerators, citing high inventory levels, and the firm, along with larger rival Whirlpool Corp. (NYSE:WHR - News) warned that demand might taper off in the second half. Sears, Roebuck & Co. (NYSE:S - News) also said home appliance sales were softer in August.
Furniture Brands International (NYSE:FBN - News) recently cut its third-quarter earnings outlook citing weak demand for its high-end home furnishings. Kimball International Inc. (NasdaqNM:KBALB - News) expects a drop in profits due in part to lower sales in its furniture and cabinets business.
"Warnings tend to be about earnings so that's a different story," Wells said. "You could have good sales gains and still be losing money. Discounting is a big factor."
Many retailers have been working to slash inventories so as not to be caught with an overflow when the consumer is tapped out and avoid deep discounting and clearance sales. Many retailers who posted positive earnings in the latest quarter cited inventory controls that offset softer sales.
Despite the conflicts, both sets of figures have their advantages.
"If you're looking at the overall economy then the data from today are probably more meaningful and more comprehensive," Niemira said. "The store-based numbers are more significant for the industry itself and for those companies."
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