Without Wal-Mart, Is The Retail Picture Skewed?
Feel like something's missing today? Oh yeah,Wal-Mart'smonthly sales.
The world's largest retailer ,which accounts for some 15 percent of the retail industry sales, has stopped reporting its same-store sales on a monthly basis.
Although Wal-Mart is not the first retailer to make this move, it goes without saying it's the most influential. Sears, Chico's, CVS, Family Dollar, Ann Taylor, Home Depot — to name a few — have all gone down this path already. And so far, Macy's, which stopped reporting monthly sales last year, is a rare example of a retailer that reversed course and returned to the practice of monthly reporting.
Some analysts agree with Wal-Mart and other retailers that have ditched the reports. They argue that monthly reports focus too much attention on short-term trends, and don't fully account for fluctuations in weather, the timing of holidays, and shifts in promotions. These factors can cause volatile results that can sharply skew Wall Street's perception of a company.
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"Monthly sales are very distorting," says Eric Beder, an analyst at Brean Murphy Barrett & Co. "They take away from the longer-term investors in retailing." (To hear Beder and Telsey Advisory Group Chief Research Officer Dana Telsey weigh in on this issue, click here.)
But some smaller investors may feel short-changed because they can't just pick up the phone and talk with the company about what it's seeing at its stores. They also don't have an army of researchers travelling from mall to mall, counting shoppers and watching promotional activity like boutique research firms do.
It also raises issues about whether the monthly sales reports offer a full picture of what is happening with the consumer. About five years ago, there were 87 companies reporting monthly sales results. Now, there are 34, according to Frank Badillo, senior economist at Retail Forward. It's clear from that statistic that we are now only seeing a smaller slice of the action.
This month's sales reports paint a picture of a still cautious consumer, shopping for bargains and basics.
The majority of the retailers who are still reporting results fell short of analyst estimates. But this picture misses color from Wal-Mart at a time when consumers are flocking to the discounter in greater numbers. Absent from our assessment of May is commentary from the retailer about what shoppers bought at their stores. We don't know if consumers are beginning to shut down again, or just continuing to tread carefully.
It's also likely, analysts say, that other retailers will follow Wal-Mart's lead and stop reporting monthly results. And our picture will grow dimmer still.
According to Customer Growth Partners President Craig Johnson, the monthly sales report represents only about 10 percent of the total U.S. retail sales.
"The monthly reports Wall Street so breathlessly awaits really primarily protray only two retail sectors, apparel chains and department stores, each of which represent well under 3 percent of U.S. personal consumption expeditures," Johnson says.
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