A plethora of inaccurate or ill conceived numbers are contributing to what our dear President might refer to as “confusement” about the recent holiday selling season. Holiday sales have been categorized as soft with average same store sales increases at about 2.5 percent. Retailers and Wall Street analysts had apparently emailed Santa a wish list indicating that they wanted 6-7 percent. Anything less would be deemed disappointing. Where do they get these numbers? Has the population increased 6-7 percent in the last year? Have earnings of the average family shot up 6-7 percent? Have their savings? With most of the real estate refinancing already done and consumers unable to use their homes as ATM machines, just where was that 6-7 percent supposed to come from?
Of course, while the above analysis seems to make sense and may be somewhat entertaining, it is completely unsound. Our overconsuming society is over-retailed. Not only do retailers compete against each other, but they cannibalize their own same store sales by plunking down yet another supercenter only five miles away from the last one. The real story of Holiday sales is quite different when you look at more appropriate numbers. Walmart’s (oh, such a terrible year) total December sales were up 8.8 percent year on year. Target was up 9.9 percent, Costco plus 14 percent, Kohls 11.2 percent, Dollar General up 12.1 percent and so on. Numbers like that don’t sound disappointing at all. It’s all about looking at the most appropriate numbers. Unfortunately, the most appropriate numbers are not always easy to come by. My personal favorite is the game of “we sold a lot of gift cards and we can’t count them until they’re redeemed.” I understand that from an accounting standpoint you can’t count them until they’re redeemed, but how many dollars in gift cards did you sell? You don’t know? Gee, I’ll bet your POS system can tell you exactly how many dollars in gift cards you sold. What you don’t know is how many will be redeemed. Apparently 20-30 percent of gift cards are never turned in. Free money – now that’s a business I like. I’ll sell you 70 cents for a dollar all day long. And hey, when does that 20-30 percent get counted?
So the overall holiday sales figures weren’t so bad after all. However, retail margins were likely to be razor thin. Walmart was discounting toys before even Halloween. I saw big flat screen TV’s being sold for $1,000 – $1,500 dollars off – and they were selling a lot of them. Hell, I even bought one myself. Lord knows the retailers aren’t about to eat those discounts on their own. They’ll be looking for markdown money. That should be infuriating because retailers weren’t closing out unsold merchandise. They were discounting starting in October as part of a marketing strategy to drive store foot traffic.
While at first blush the toy industry appeared to have a good year, we have to tease out the video game numbers. With several new game platforms and Nintendo’s hot product, video game sales rose 18% to $13.5 billion. Now the numbers get a bit foggier. What seems clear, or at least unclear, is that the toy business did much better than the previous two years’ 4-5 percent annual decline.
Why is it so difficult to just get the straight numbers in a timely fashion? Wall Street analysts and research firms devise all these numbers, indicators, formulas, etc. Many of them, although they seem to make sense, are ill conceived or misleading. The numbers are then slowly dribbled out over time. These numbers are used by investors from hedge funds and pension managers to Ma and Pa Kettle to make buy and sell decisions. More different numbers dribbled out over a greater length of time leads to more buy and sell decisions. Wall Street clearing houses make money on every incremental trade. Now there’s a business I’d like to be in too. Alas, too many numbers.
That leaves me stuck in the recruiting business. Even though it’s a lot more work than selling 70 cents for a dollar (sigh), Toyjobs had its second best year out of twenty-five in 2006. Just don’t ask me to tell you our numbers.
See ya’ at the Toy Show,