Wednesday, January 16, 2013

Missing the Bull’s Eye: Holiday Sales Forecasts

Retail sales forecasts have long been a standard tool in the industry, and while many unforeseeable factors effect a retailer’s sales year-over-year, in general they’re a useful guide.  The research analysts with whom I’ve been associated over the years have done a pretty good job with such forecasts. Of course, the standard joke has always been that research guys don’t actually forecast sales - they just use a dart board.

When it comes to forecasting holiday retail sales performance, the dart board image becomes even more appropriate. Merchandise plans are in place and shelves are stocked, but there are many outside influences which retailers can’t control. Predicting retail sales results accurately within an eight-week time frame is not really very productive, and may not even be possible, which makes holiday sales forecast especially problematic. However, industry prognosticators continue to make them, tossing out predictions early in the holiday shopping season that don’t hold up by the end of the season – and missing that dart board’s bull’s eye by a country mile.

Like decorating the house and wrapping presents, holiday sales predictions are just one of the things you come to expect at Christmas time. Every autumn I chuckle at article after article in the news predicting retail sales for the upcoming shopping season.  As early as September, we begin to see the holiday predictions roll out. At the end of last September, for example, Deloitte said it expected a sales increase of 3.5% to 4.0% compared to last year. That same month the International Council of Shopping Centers released its relatively conservative holiday forecast of 3.0%. And on October 2, The National Retail Federation (not surprisingly, on the high side of the forecasts) predicted a gain of 4.1% compared with last year, significantly higher than its 10-year average of 3.5%. Note that these forecasts are all positive, yet all different.

With inflation so low in recent years, predictions have fallen into a pretty tight range, and this year’s estimates were the same. Ms. Consumer had a lot on her plate when it came to planning her holiday shopping budget. With a softening economy, rising gas prices, a presidential election, and a looming fiscal cliff on the negative side, and only a slightly improving housing market and an uptick in consumer confidence on the plus side, there was at the very least considerable uncertainty about shopper demand.

So let’s flash forward a bit, and see how it all turned out: On January 2nd, MasterCard Advisors Spending Pulse reported a “gloomy” sales result of only 0.7% year-over-year compared with 2% last year. On January 5th, Thomson Reuters reported sales 3.3% higher than last year but “only because of big markdowns in the final week.” On January 9th Shopper Trak split the difference, stating a year-over-year change of 2.5%. On January 15 the NRF reported that holiday sales rose 3%, well below their predicted 4.1%. Forecasts made early in the season clearly didn’t hold up by the end of the season. How did we go from projections as high as a 4.1% gain, to results as low as a meager 0.7% gain? And that’s just this year. Next year it could all go the other way.

So what happened? Well, I repeat, predicting retail sales results accurately is not productive, and may not even be possible. This is especially true when those forecasts are influenced by Black Friday sales figures. The Black Friday phenomenon has thrown the holiday shopping season, and sales forecasts for the holiday season, way out of whack.

It used to be that Black Friday shopping was a leisurely pastime, a way to make an early dent in one’s holiday shopping, and perhaps take advantage of a promotional sale or two. However, it only takes a retailer or two to change the dynamic, and make everyone else react for fear of losing market share. Today Black Friday (which now apparently includes “Grey Thursday” as well) is billed as a huge socio-economic event unequalled even by the Super Bowl.

Every year, just about the time the turkey has digested, we hear the first reports of sales figures from the Black Friday weekend, with everyone anxiously awaiting those Monday morning results. It’s supposedly an insightful gauge by which to measure the pulse of the holiday shopper and the strength of the holiday retail season. HOGWASH! With gross margins slashed to the hilt and shoppers jockeying for position outside stores, how can Black Friday be a realistic indicator for the entire season?

Typically it’s not whether the numbers were good or bad but how good. But good Black Friday sales figures don’t necessarily mean good things for a retailer’s holiday performance or annual bottom line. With retailers passing up profit to drive traffic to their stores and divert it from others, all those dollars spent in those few days means that retailers have not ensured a strong holiday season (and as is commonly believed, the retail year). They gave away the store in order to get people into the store, and therefore simply cannibalized not only their gross margins, but also the balance of the holiday season. The Monday morning Black Friday result has little to do with the season’s final outcome, which, as we’ve already established, is nearly impossible to predict with any real accuracy. And yet we put ourselves through it every year.

So the next time you see those early holiday sales predictions, or the next time you hear the industry press trumpeting the strength of the dubious Black Friday weekend, just remember that the prognosticators you’re hearing from probably have a dart board – on which the bull’s eye doesn’t get hit all that often.

Bob Sheehan, Vice President of Research

Company News

Promotions: Vanessa Yamashita has been promoted from Senior Property Manager to Vice President of Property and Asset Management. Vanessa has been a significant team player in managing sites in and outside the New England area including properties in Florida, Texas, North Carolina, and New Jersey. Mahendran Subramaniam has been promoted from Auditor of Parking to Parking Manager in the Boston, MA office. Carol Rash has been promoted from Assistant Property Manager to Property Manager in the Burlington, MA office. New Business: The Leasing Team has added a 2,061 s/f street retail space at 1229 Centre Street, Newton Centre, MA to its portfolio. Lynne Cohen-Friedman is marketing the space.

Industry News: National

US chain store comp retail sales for December rose by 4.5% year-over-year as measured by the ICSC's tally of 20 major retail chains, in-line with expectations. The “fiscal cliff”, Hurricane Sandy, and the Sandy Hook school shooting created additional pressure as consumers reacted to an onslaught of bad news. Comp sales for the holiday season, according to the Nationa Retail Federation, rose only 3%, missing the NRF’s projected 4.1% gain. Among merchandise categories, Wholesale Clubs led with a gain of 9.0%. Luxury Stores followed with a 8.6% gain. Department Stores rose 4.5%, Apparel was up 4.1% and Discount Stores were up 1.5%. Among individual retailers, Gap gained 5.0%, and Limited rose 3.0%; Costco was up 9.0%. Nordstrom was up 8.6%; Target was flat, and TJX rose by 6.0%. Macy’s gained 4.1%, and Kohl’s rose by 3.4%; Rite Aid was down 2.2%...Target will offer its online price match policy year round. Target matches prices with online retailers such as Amazon,,, and The policy expands on Target's previous policy that included price adjustments and ad matches. The policy works on purchases made within 7 days...PayPal announced that 23 national retailers are signed up to accept PayPal in more than 18,000 retail locations, including Famous Footwear, Dollar General, Mapco, RadioShack, Spartan Stores, Abercrombie & Fitch, Advance Auto Parts, AĆ©ropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Home Depot, Jamba Juice, JC Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct, and Toys “R” Us. 

Industry News: Accelerating

The TJX Cos. has acquired Sierra Trading Post, an online retailer, for $200 million in cash. As part of this transaction, TJX acquired Sierra’s office, fulfillment center and photography studios in Cheyenne, WY, and its four outlet stores in Idaho, Nevada and Wyoming...Gap Inc. has acquired women’s apparel retailer Intermix Holdco. Intermix operates 32 stores and an e-commerce site with a mix of luxury brands including merchandise from up-and-coming designers. Intermix’s senior team will continue to operate the business from New York…Polaroid will launch a new experiential retail concept called Polaroid Fotobar, opening at least 10 locations in 2013. The stores are designed to allow consumers to take images from digital devices and easily turn them into museum-quality art. The format will debut in February, in a 2,000 s/f Florida store l...TC Global Inc., which operates  47 company-owned and 12 franchised Tully's Coffee stores, has sold its assets to Global Baristas in a private auction which included bidders Starbucks Coffee and Baristas Coffee. Tully's filed for protection under Chapter 11 in October, closing 19 unprofitable stores…Leslie's Poolmart Inc. purchased two dozen Warehouse Pool Supplies locations. Leslie's runs 770 retail and commercial service stores across the US...Uniqlo continues its US expansion by opening two mall locations, at Palisades Center in West Nyack, NY, and Ridge Hill in Yonkers, NY. Both stores will open in spring 2013. The clothing and accessories retailer currently operates 5 US stores, 3 in New York City, 1 in San Francisco and 1 in Paramus, NJ…During its last fiscal year, which ended April 2012, QuikTrip Corp. added 46 stores and it plans to add more. The convenience retailer is currently in 11 states and operates 639 stores. 15 stores are currently under construction in the Carolinas. The chain plans to have them all open by April...Orange Leaf frozen yogurt opened its first store in Manhattan.  Orange Leaf has more than 200 locations nationwide.

Industry News: Decelerating

Macy's Inc. will close 6 department stores nationwide, including a store it has operated in Belmont, MA since 1978.  Macy's also plans to open 5 new Macy’s stores, 2 new Bloomingdale’s, and 1 Bloomingdales Outlet nationally, and expand or upgrade several others in the current year...Supervalu has agreed to sell its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores, and related Osco and Sav-on in-store pharmacies, to AB Acquisition LLC, a consortium of firms that includes Cerberus, Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners, and Schottenstein Real Estate Group, in a transaction valued at $3.3 billion.

Industry News: New England

Nordstrom will open a 30,000 s/f Nordstrom Rack in the former Old Navy space at Maine Crossing Shopping Center in South Portland, Maine, the first in the state…Linear Retail Properties has purchased 2 NH properties, 285 Daniel Webster Highway, a 5,969 s/f Chili’s Grill and Bar, across the street from the Pheasant Lane Mall, and 219 Daniel Webster Highway, a 43,947 s/f development site which was owned by Cumberland Farms…Tribeca APL Boston LLC of London has purchased the Apple store at 815-825 Boylston St., across from the Prudential Tower, in Boston’s Back Bay, for $27.5 million. The 21,348 s/f showcase shop was sold by Heritage Legacy LLC. Apple’s flagship store opened in 2008 and at the time was the company's largest store…Pottery Barn is the latest store to vacate the Atrium Mall in Newton, MA. The store will reopen across Route 9 at The Street at Chestnut Hill (formerly the Chestnut Hill Shopping Center). The only remaining stores in the Atrium include the Cheesecake Factory, Restoration Hardware and Gretta Cole spa…Developers of 1265 Main St., the former Polaroid site in Waltham, have announced tenants for the 280,000 s/f mixed-use plaza, including Market Basket, Starbucks, Marshalls, TD Bank, Bonefish Grill, and Jake-n-Joes Sports Grille. Construction of these 6 store spaces should begin by late March or April, with projected partial occupancy of by the end of 2013...Alliara LLC has paid $31.6 million for a 27,796 s/f retail and apartment building at 18-28 John F. Kennedy St., in Harvard Square, Cambridge, MA. The building includes 16 apartments and 12,150 s/f of ground floor retail housing Papyrus, Uno Chicago Grill and Vitamin Shoppe...The owner of Precious Memories Inc. has moved its Malden bridal salon to a new store that’s more than 4 times larger than its previous location, a 10,000 s/f space at 1256 Eastern Ave…Lasalle Hotel Properties has acquired a majority interest in Boston’s 298-room luxury Liberty Hotel, formerly the site of the Charles Street Jail, through a $170 million joint venture with the property’s original developer and co-owner, Carpenter & Co. of Cambridge. The hotel will continue to operate under the Luxury Collection franchise. It includes 5 bars and restaurants, including Clink, the Liberty Lobby Bar and Catwalk. Two others, the Alibi Bar & Lounge and Scampo, are leased by the Lyons Group. LaSalle owns 40 hotels, including the Hyatt Harborside, Westin Copley Place and Onyx Hotel in Boston. Carpenter & Co.’s portfolio ranges from the St. Regis Hotel in San Francisco to the Charles Hotel in Harvard Square, Cambridge…A federal judge warned attorney Shannon Liss-Riordan, a lawyer for former Upper Crust workers, about potential ethics violations in her pursuit of the bankrupt chain’s lease assets. Judge Henry Boroff denied an attempt by to buy leases for 4 shuttered pizzerias in the South End, Lexington, Watertown and Wellesley which are slated to be sold. Liss-Riordan represents Upper Crust workers in a separate class-action wage dispute lawsuit, and teamed with an investment partner on the winning bid for the chain’s Harvard Square lease at auction…Sunnyside Realty Group LLC, an affiliate of Rubicon Real Estate, has purchased the 16,000 s/f Sunnyside Plaza at 915-947 Worcester Street in Natick, MA for $5.8 million. Tenants include includes Bank of America, Supercuts, Red Wing Shoes, Doctors Express and Oga’s restaurant...A new, local pharmacy will open later this month in Winchester, MA at the site of the former Winchester Drug. CVS, which had appeared to be interested in the site, passed on it...Katz Properties has purchased the 31,677 s/f Wayland Village Plaza, a suburban strip mall at 297 Boston Post Rd. (Route 20) in Wayland, MA for $6.3 million. The center is anchored by Whole Foods Market. NAI Hunneman represented the seller.

December Retail Sales Report

Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0.

Treasury Yields

Treasury Yield Sources:;

Commerce Department Monthly Sales

The Commerce Department said retail sales rose 0.5% in December, slightly better than November's 0.4% increase and the best showing since September. A 1.6% jump in sales of autos and auto parts led all categories.  Excluding a 1.6% decline in gas station sales, retail spending increased 0.8%.

Source: U.S. Department of Commerce -

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had declined slightly in November, posted another decrease in December. The Index now stands at 65.1, down from 71.5 in November. The Expectations Index declined sharply to 66.5 from 80.9. The Present Situation Index increased to 62.8 from 57.4 last month.

Source: The Conference Board -

Purchasing Managers Index

Manufacturing expanded in December as the PMI™ registered 50.7 percent, an increase of 1.2 percentage points when compared to November's reading of 49.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business -