A number of Black Friday retail sales surveys were released over the weekend. All measures pointed to a robust start to the holiday shopping season. Strong data were received from the National Retail Federation, ShopperTrak, and Comscore. None of the individual sales measures are completely reliable, but the collective strength is likely indicative of a higher growth rate in holiday retail sales relative to a year ago. This result, if it holds through the entire holiday season, would be impressive given how US Consumers have continually (and wrongly) been expected to roll over.
The National Retail Federation (NRF) estimated that Black Friday weekend sales were up strongly, achieving new highs in sales volume. The NRF puts a survey together in conjunction with BIG Research. The strong sales estimates from the NRF, which were widely quoted in the popular press, resulted from a survey of 3,826 consumers. With any survey based data there are errors associated with the small sample size and inaccurate responses. Nonetheless, the NRF estimates that the average US shopper spent $398.62 this year vs. $365.34 last year (up 9.1%). The NRF also compiles an estimate of total retail spending. This year’s total Black Friday weekend sales estimate was for $52.4B which was up 16.4% relative to last year’s estimate of $45.0B.
ShopperTrak is a separate retail consulting service measuring mall traffic. ShopperTrak uses laser sensors which are installed in 40,000 retailers around the country. The technology is able to block out employee movement in the stores with special tags the employees are instructed to wear. Traffic counters are an imperfect measurement because you still need to estimate the conversion rate for traffic to actual purchases. Nonetheless, traffic has been under pressure this year, and running negative as retailers raised prices. ShopperTrack estimated that traffic on Black Friday increased 5.1% which was higher than recent traffic trends this year and higher than the 0.3% estimate of traffic growth last year. One complicating factor for interpreting traffic data is that many retailers opened stores at midnight this year as opposed to 4:00am. The additional 4-hours were likely worth less in terms of incremental traffic relative to peak hours in the morning but could have boosted traffic counts by 6-8% for stores that extended hours. Many large retailers opened at midnight on Black Friday but a number of smaller chains did not. The 5.1% growth rate in traffic, while likely inflated by 1-2%, was still strong even after accounting for longer hours.
Comscore measures online retail sales and has also reported strength. During the first 25 days of November, online sales grew by 15%. Thanksgiving Day online sales grew by 18%. Black Friday on-line sales were reported up 26%. Many traditional retailers have been investing in and building their online presence. Some of the internet based sales strength will accrue to the traditional retailers as well.
The fourth quarter is the most important quarter for retail sales, and the holiday period (Black Friday through New Year’s) is the most important period for the fourth quarter. That retail sales growth rates can match or exceed results from last year are impressive given record lows in consumer confidence and heightened political uncertainty. The strength from the US Consumer is a result of three years of a higher savings rate (deleveraging) and the fact that while high, the unemployment rate is slightly lower than it was last year and more Americans are working. Predictions this summer, that the US economy was inevitably headed for a recession, look premature. I believe a US recession will be avoided short of a financial catastrophe in Europe, which still may happen, though it shouldn’t.