Will Retail Sales Get Even Better?

11/25/2013 12:01 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The recent data on Retail Sales was stronger than expected, but MoneyShow's Jim Jubak thinks that the plans of many retailers for Black Friday are sending a different message.

On November 20, we got retail sales. They come out of the Census Bureau—which is kind of strange—but that's where the data comes from, and they were stronger than expected for October. There's a number called the core retail sales, which takes out automobile sales and gasoline sales, because those tend to be volatile, so the core showed growth of about 0.5% in the month. Economists have been looking for 0.1%, so yeah, so we got 0.5% instead of 0.1%, so, better than expected. The reason that's important is that October's the month of the government shutdown, so the fear—and I think the reason why the expectations were so low—fear was that the shutdown would've really knocked the stuffings out of retail sales. People would be uncertain enough, even if they were to continue to work, so they might cut back, so that's good news the economy didn't falter. It's not really outside of the trend.

What it means is that the trend continues, the trend of a growing, but slowly growing, economy. This is not a number that's out of line with where we were before October, and there are a couple things in here that suggest that maybe this number might be a little high because of one-time events, so that, for example, we saw a big increase in sales in electronics and appliance stores, about 1.3%, 1.4%. Much of that probably had to do with the introduction of Apple's new iPhone in October. I'll give you a little quick bump. You won't get that going forward.

The thing that I'm kind of interested in—worried about, if you will—is the contrast between that stronger than expected number and what we're hearing about holiday season plans from big retailers like Best Buy, Walmart, etc. All these companies are acting like they're worried about the holiday season and the best indicator of that is what people, what these stores, what these companies are doing for Black Friday. Black Friday is the Friday after Thanksgiving. It is called Black Friday because traditionally, it's when many retailers went into the black for the year rather than red. Black Friday is being pushed forward constantly, so that this year what we've got is a lot of companies deciding they're going to open actually on Thanksgiving in an attempt to sort of capture some of the Black Friday sales that might've gone to competitors, so Best Buy will be open on Thanksgiving evening starting at around 6:00. Walmart has said that they're going to run special promotions at 6:00 and 8:00 that night, so you can see a battle going on there.

The other thing is that you're getting companies saying, “We will match the price—the Black Friday price—of any of our competitors,” so Best Buy has said, “Well, we'll match Walmart, Target, on prices.” Walmart has said, “Well, we'll match any price, not only just the Black Friday price, but we'll match it before Black Friday.”

So, for the week before Black Friday, they're going to match Black Friday promotional prices. Exactly how that's going to work, I don't know, but so far, the candidates for this have got a price war, including Walmart, Target, Best Buy, and Toys R Us. You don't behave this way if you think that the holiday season is going to be so strong that everybody's sales are going to be up. You behave this way if you think holiday sales are going to be weak enough so the way you bolster yourself, the way that you need to bolster your sales is by stealing them from competitors, and that's where I think we are, so this is not a sign that holiday sales are going to be really, really bad. It's a sign that they're not going to be strong enough to lift all boats and the companies are trying to make sure that theirs is the boat that gets lifted by sales, by taking a little bit from competitors wherever they can, and that's why I think that we're looking at decent—but nothing spectacular—in the way of growth and retail sales for the fourth quarter.

This is Jim Jubak for the MoneyShow.com Video Network.

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