What Does Rick Davis Think About Yesterday’s ICSC Report?

When I see any economic data addressing consumer retail activity, I immediately think of Rick Davis and his fabulous work at Consumer Metrics Institute. On that note, and given yesterday’s strong upward move in the market driven largely by a positively perceived ICSC report, I went straight to the source and asked Rick for his thoughts. I had the following exchange today:

Rick,
Any quick comments or thoughts on the report released by the ICSC? I
know that the report captures same store sales which makes for a big
disqualification and is not properly captured but any thoughts you may
have are always deeply appreciated.
Thanks.
Larry

Larry:

Actually, the ICSC has put out several recent releases that paint a mixed picture (at best):

1) The June 8th release stated that “chain stores posted a 3.0% gain in June–within the expected 3-4%, but at its low end. The performance was relatively uneven and in some cases even disappointing. Lower prices–discounting, generics, etc.–all held back the reported pace of spending.  The best performing segments were luxury (+8.8%) and department stores overall (+5.9%).”

This is not a surprise to us, since our Retail Index was up between 4% and 10% all month. We also saw that the Luxury and Department Store segments were the strongest. However, it is interesting to see some of the language used in their release: “low end”, “uneven” and “even disappointing”. Clearly they expected things to be better.

We have noted before that our data tells us that chain stores have been out performing the smaller “mom-and-pop” stores throughout this recession. I’m not an expert in consumer psychology, but that tells me that the rise might be as much about the shopping social experience as about the acquisition of goods. What our other data is telling us is that the sales
being rung up are largely from “pocket change”, not the serious sales that require the assumption of additional debt. Thus we may be seeing a spree of “feel-good” spending of available funds, but not the serious shopping for durable goods that drives economic growth. And to many shoppers,”feel-good” shopping means visiting the major luxury chain stores with
friends, even if the purchases themselves aren’t what they might have been several years ago.

2) On July 7th the ICSC issued a release stating that shopping center vacancies increased yet again while lease rates were declining. These are not signs that any kind of recovery is in full swing. Although the ICSC doesn’t distinguish in their reports between major anchor tenants and the local “mom-and-pop” stores and franchisees, my guess would be that the
increased vacancies have recently come disproportionately from the smaller merchants. Again, recessions tend to favor the largest players during shake-outs, and for that reason ICSC reports will be somewhat biased as a result of their constituencies.

3) Perhaps the key ICSC report for the past week was issued on July 2nd,and it reported that U.S. Shopping Center Industry jobs declined by 2,000 during June. This is not a large number, of course. But it addresses the most important characteristic of this “recovery” — that there has not yet been a turnaround in the jobs situation. Until that happens, it doesn’t matter what Ben Bernanke or Goldman Sachs is doing — in the real world the pain remains.

Thanks again,

Rick Davis
Consumer Metrics Institute

Once again, Rick Davis provides a wealth of sense on cents while helping us navigate the economic landscape. Do yourself a favor and visit Rick’s site regularly. As I have maintained previously and repeat here again, the premium product delivered by CMI is well worth the  nominal annual fee.

LD