Department Stores vs. Nonstore Retailers: A Zero Sum Game

Click to enlarge.


Click to enlarge.

This is what we know.

1. If the trend continues (might not), department store sales go to zero and department store employees go to zero.

2. If the trend continues (might not), there will be an exponential trend failure in nonstore retailer sales in the not too distant future. Much of the nonstore growth is apparently coming at the expense of department stores. There's only so much blood left to squeeze dry.

3. If the trend continues (might not), then Bill Ackman made an even poorer long-term decision to invest in JC Penney than most believe. What was he thinking?

4. Historically speaking, it was dangerous to invest in the stock market when the the real spending per capita was near its peak. That's assuming Dec 2000 and Feb 2007 would not be considered particularly good entry points of course. As a side note, we may be very near a peak right now. The recent peak was in April at $164.55. As of June, we're down 97 cents to $163.58. It's noisy data. Hard to say if that was the ultimate peak in this cycle. I can say that the peak in the last cycle was $163.67 though. The retailer "recovery" therefore seems complete. Yay.

We don't yet know the data point for July since the CPI for July hasn't been released yet. I suspect that it won't be pretty though. Many nominal dollars were spent on food and gasoline, and there just weren't that many left over.

As always, just opinions! This is not investment advice.

Source Data:
U.S. Census: Retail Trade
St. Louis Fed: CPI
St. Louis Fed: Population