The National Retail Foundation (NRF) released a report earlier this week breaking the U.S. retail sector down into some granular numbers.
The headline number is the NRF’s forecast for U.S. retail sales this holiday season: A 1% drop compared with last year, which itself shrank substantially compared with 2007.
October’s year-over-year numbers – used to predict holiday spending for individual companies – are mixed. Leading the laggards are building and gardening materials – down 16.6%. Home furnishings and furniture are also weak, off 7.6% year-over-year.
However, while it is likely that few people will find HDTVs or couches under their tree, there may be a large number of sweaters. Clothing purchases have grown 3.8% since last year.
Indeed, low-priced clothing outlets like TJ Maxx and Ross stores – have actually grown sales since the recession began.
A number of others – like Nordstrom, Aeropostale, and BJ’s Wholesale Club – are holding the line, or reporting small increases.
On the other side of the ledger, The Limited, Macy’s, The Gap, and JC Penney have all seen declines since the recession. Abercrombie & Fitch, meanwhile, started declining even when the economy was healthy.
Businesses that were struggling in the boom years aren’t likely to make it out of a prolonged bust. Still, there are a number of companies that are, perhaps not thriving, but nonetheless remain healthy and growing. This is a helpful reminder that, even in the worst of conditions, the best companies will continue to perform.
It is also helpful to remember that, while beating analyst expectations is the key for short-term stock charges, it’s increasing year-over-year sales that are essential for long-term health.
Keeping such perspective increases insight when examining a company like Nordstrom – which had shares fall on missed estimates, despite increasing profits.
Those profits are likely to continue rising. “Although there is continued uncertainty surrounding consumer spending, [Nordstrom] experienced an improving sales trend in same-store sales in each month of the quarter while effectively managing inventory and expenses,” Nordstrom’s said in a statement.
Contrast that with Abercrombie & Fitch, which received a stock bump on news they’d lost less business than originally feared. Abercrombie has seen declining sales for the past four years.
In a difficult economy – one that will likely claim a few more victims before we return to health – such fundamentals, considered secondary for stock prices, are the truest indicator of viability.
Outside Wall Street, analyst estimates and company guidance are irrelevant. With many retailers struggling to find success on Main Street, we suggest you use Main Street numbers to discover the true health of an organization.
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