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2011 Looking Up. Or Down.


Local TV news has a story of economic optimism:

What a difference a year makes. Last year at this time, a trip to Mall of America showed empty stores and struggling businesses. This year, they’re packed with people ready to spend, even after the holidays.

The 2010 holiday season was the best since 2006. Shoppers spent $584 billion in the 50 days leading up to Christmas – up 5.5 percent from 2009. And economists believe the trend will continue into the new year.

Doing what Big Media does so well, the reporter interviews a handful of shoppers and store managers who say they’re seeing more traffic and more spending at the malls. But as I am so often reminded, the plural of “anecdote” is not “data”.

Stories that make the news are not the economy. My own informal survey of the mall in December revealed very much discounting early in the season. Consumers may be buying, but that spending will not make its way to the retailers’ bottom lines.

What’s on the bottom line, on the quarterly financial statement, now that’s data. So are sales figures (they’re the top line on the financial statement). And the top line is already known to be wavy:

"Retailers' same-store sales numbers are looking a little softer than expected," said Ken Perkins, president of RetailMetrics. "All indications last month showed that malls were crowded and people were shopping. So this is a little puzzling that December won't be a blowout sales month."

According to some early same-store sales results Thursday, many specialty clothing chains missed analysts' expectations for the month, according to sales tracker Thomson Reuters.

Same-store, or sales at stores open at least a year, are an important gauge of a retailer's performance.

As always, some stores and some sectors do well. The TV reporter must not have stood in front of clothing stores.

Or Target. Or Best Buy.

No. 1 U.S. electronics retailer Best Buy Co. said Friday that sales at stores open at least 14 months fell 4% in December, hurt by lower demand for televisions and videogames.

For December, the Minneapolis-based company said its same-store sales dropped 5% in the U.S. and slipped 0.1% internationally. Total revenue for the month ended Jan. 1 decreased 1.6% to $8.4 billion.

If retailers are discounting to get sales and boost their top line, that hurts the bottom line. They sell more and make less.

It takes some time for the accountants to get to the bottom-line number. Next month we will know if that intrepid reporter was on the frontier of truth, or if the less rosy view supported by data we know today will be confirmed.