Retail: The Best of Times or Worst of Times? (Chart of The Day 14)

The BEST Christmas in 6 Years or The WORST December in 10?

Last week, the Census Bureau released Retail Sales data for the month of December.  The headline number was a stunning FALL of 1.2%. (The Chart on the Left is Seasonally adjusted month over month retail sales.)

Following this news, investment banks  tripped over themselves to lower their 4th Quarter GDP estimates.

Goldman Sachs and JP Morgan cut estimates to 2% from 2 1/2%, but the largest reduction was the Atlanta Fed which now projects growth at 1.5%.

According to the Census Bureau, all categories of retail sales suffered, INCLUDING ONLINE which fell by 4%!

HOWEVER, the severity of the fall, especially online, is COMPLETELY INCONSISTENT with private sources and common sense.  On December 26th, Master Card reported that Holiday Sales ROSE 5.1%, turning in the BEST performance in 6 Years.  Online sales rose by nearly 20%!  Amazon, which dominates online retailing had RECORD SALES.  (http://fortune.com/2018/12/26/us-retail-holiday-sales/).

Clearly, something is VERY wrong with this picture!

Markets See Through The Bad Data

Initially, markets sold off hard on the recession or slowdown fears.  While the Financial Media missed the sheer absurdity of the Census Bureau data, especially the IMPOSSIBLE drop in ONLINE sales, the market has not.  In fact, two key retailers, Costco and Walmart, turned BULLISH on Friday breaking out of ROUNDED Bottom Reversals.  This amazing pattern is EVERYWHERE and so far, every company forming one in their price charts has advanced smartly.

This chart pattern, and its implications for the market, was initially discussed here: “Has The Bear Market Been Knocked Out?”  (https://markonomics101.com/2019/02/05/has-the-bear-market-been-knocked-out/).

A Slide Show of key retailing companies is below.  Some takeaways from these Charts are as follows:

  1. MasterCard is nearing NEW ALL TIME HIGHS.   Whatever slowdown the market foresaw is likely over.
  2. With the exception of Amazon and Target, the major Retailers are ALL in BULLISH patterns.  Target is on the cusp of a BULLISH breakout.

Another key leadership group recently featured are the Semiconductors.  They, too, have formed ROUNDED Bottom reversals and are leading the Nasdaq higher.  “Chipmakers Poised To Lead Nasdaq Higher”.   (https://markonomics101.com/2019/02/06/chipmakers-poised-to-lead-nasdaq-higher-chart-of-the-day-13/).

But Retail Bankruptcies Continue Unabated

Making it easier to accept horrendous sales numbers at face value is the parade of retail bankruptcies among brick and mortars.  The latest casualty, Payless Shoe Source, is expected to announce its second bankruptcy in the last two years and to commence liquidating operations.  Payless joins Sears, Radio Shack, Shopko, Gymboree and Toys ‘R Us among others.  Retailers without a meaningful online presence, such as JC Penney, are also at risk.  (https://www.usatoday.com/story/money/2019/02/13/more-store-closures-expected-2019-new-report/2865505002/).

All in all, retailers totaling more than 2000 stores have announced bankruptcy or liquidation in the first 6 weeks of 2019, an increase of 23% from last year.  The surviving retailers are climbing the proverbial “Wall of Worry”.

So, is this the BEST or times or WORST of times for retailers?  BOTH, depending on which retailer.  How can you tell who’s who?

Be Informed, Not Misled.

It is the BEST of TIMES to be a valued subscriber.  A plethora of opportunities awaits, but many potholes remain to be avoided.

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