The weekly flow of same-store sales, as measured by the International Council of Shopping Centers (ICSC) and Redbook have offered really ugly insight into consumer spending of late. The importance of consumer spending in the United States cannot be understated. Unfortunately, it is slipping, as I pointed out in "Recession's Key Ingredient Added" and "Glaring Recession Signal - Consumer Spending Stops."
This week's data from the ICSC showed same-store sales inched higher by just 0.5% in the week ending August 25, 2012. That embarrassing growth came on a prior week decline of 1.5%. And this is during a period within which consumers are supposed to be shopping for back-to-school needs. If you go back over the weekly data through the past several months, you find a soft trend that in my estimation reflects a path toward recession.
On a year-over-year basis, the ICSC reported same-store sales growth of 3.4%, which marked improvement over the prior week's 3.1% growth. While this rate is decent, in weeks past we've seen growth under the rate of inflation, which clearly implies economic contraction. Redbook reported the year-to-year rate at 1.5% this week, versus 1.9% last week. Each of those rates reflect a slower pace than inflation, and are inadequate to meet current mainstream economic projections (not mine, obviously).
I don't believe we have to look too far for anecdotal evidence of consumer softness either. Even high-end retailer Tiffany (TIF) cautioned on the outlook yesterday after reporting short of Wall Street expectations. Tiffany's shares rose yesterday, get this, partly on a lesser same-store sales decline (-1%) than was expected by analysts (-4%).
Others like J.C. Penney (JCP) are suffering because of poorly timed dramatic change at a time of economic question. The discounters are all the rage today; I even noted Mitt Romney and his wife bragging about buying some shirts at Costco (COST), perhaps in an effort to fit the economic reality of most Americans. It is the best price sellers like Wal-Mart (WMT), Amazon.com (AMZN), eBay (EBAY) and Dollar Tree (DLTR) which are doing best today. That's something I pointed out through several articles over recent months, including "5 Stocks to Own if Consumers Check Out." It is because they sell things cheapest at a time when more Americans value price most.
The one-year chart of the Consumer Discretionary Select Sector SPDR (XLY) does not reflect the environment I just highlighted. Thus, it illustrates an environment within which many stocks are likely vulnerable.
The SPDR S&P Retail (XRT) offers the same view.
At 10:00 AM EDT this morning, the Conference Board reported Consumer Confidence dropped like a rock, to 60.6, from 65.9 at last check. That should be no surprise to readers of my recent write-up, "Regarding the Consumer Sentiment Celebration - I'll Pass," but it's waking some folks up to the truth today. Stocks are moving lower since the 10 a.m. Eastern release, with the SPDR S&P 500 (SPY) indicating lower fractionally. Take heed fellow investors because if the consumer is checking out as I see it, a rude awakening is in store for the second half economy and the stock market.