Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election

According to various anecdotal reports, in addition to launching the stock markets on an unprecedented meltup, Trump’s presidential victory has also boosted consumer confidence, leading to a spike in post-election spending.

That, however, is not only not validated by the actual data, but according to evidence, retail spending – a key component of the Trump “hope” trade – has actually slowed down.

One snapshot of what consumers did pre- and post-elections comes from the latest Bank of America credit and debit card data. The bank pulled daily card data and calculated “core control” sales which it defines as retail sales ex-autos, building materials, gasoline and groceries. It then indexed this spending on election day and compared it to the trends after the 2012 and 2008 elections. Noting the weekly pattern where sales pick up on the weekend, it finds that spending after the election was in line with the prior two election years. This year, sales accelerated a bit more as we approached the holiday season, however slowed down modestly in the days after. Overall, as BofA says, “there is little evidence of a particularly strong post-election boost in spending this year.

A more interesting report, one which relies on satellite imagery to look at parking lot activity of multiple US retailers in the pre and post election season, as well as over the critical Thanksgiving and Black Friday period, comes from JPMorgan. The summary conclusion: the analysis suggests significant activity weakness at core US retail locations, as JPM finds “that Y/Y activity trends worsened post the election contrary to stock market moves and color from some management teams.”

Here are JPM’s findings:

  • Leveraging Satellite big data. We are leveraging our own ability to manipulate and analyze large data sets against proprietary parking lot car count data from Orbital Insight. Orbital Insight collects satellite imagery and then applies proprietary machine learning based image recognition technology to count cars in parking lots on a daily basis. The data we are using here is comprised of over 280k daily datapoints spanning multiple years.
  • Big picture trends negative. We observe a deterioration of total car counts in aggregate that has taken place more post the election than prior to it. We find this interesting as it is counter to prevailing thought on Thanksgiving demand but consistent with weaker early Fall retail trends.
  • IT Hardware/Networking takeaways. We are already forecasting N. American handset units down 11% Y/Y in Q4 but we had been expecting very slight growth of 0.5% for PCs. Should consumer demand turn out sluggish over the Holiday season we believe Apple would be most impacted due to its high (~30% of unit volume) exposure to the US in Q4. QCOM, GLW and HPQ would also likely be impacted.
  • Retailing/Dept. Stores & Specialty takeaways. Larger picture, average Holiday traffic across our sample of 11 retailers under coverage has moved from positive low single digits in 2014 to flattish in 2015 to negative mid-single digits in 2016. Near-term and consistent with our field work, 4Q16-to-date has been a tale of two worlds with traffic down -6.0% in aggregate from Nov 1 through Dec 4 given the warmest November in 25 years improving to -3.2% in the week of Black Friday.
  • Food Producers/Retailers takeaways. We view the parking lot data as mixed for both Kroger and Whole Foods. To the negative, in the three week period following the election (11/14-12/4), traffic trends, which were already declining Y/Y, seemed to get a bit worse at both grocers. To the positive, there seems to be slight sequential improvement in the two weeks around Thanksgiving (11/20-12/4), an encouraging indicator.
  • Retailing/Broadlines & Hardlines takeaways. It is clear that the election disrupted sales with a snap back in the final two weeks of the month and better trends over the Thanksgiving periods. Most companies saw deteriorating trends in the QTD period vs. the Pre-election period. The largest decelerations were DKS, VSI, WSM, LOW, WMT and MIK. On the positive side TSCO was the only company to show improvement in the QTD period

Visualizing the underlying data:

JPM’s conclusion: “Traffic data at retailers is uniformly weak after the election and since Nov. 1 As shown in the figure [below], year over year comparisons across the retail groups are uniformly weak.” 

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Some more granular details looking at retail subsectors, emerge when focusing on department stores and specialty softlines.

Sifting through the satellite foot traffic data – we outline 4 primary takes over the October-December holiday timeframe the past 3 years. Larger picture, the declining foot traffic pattern across our Department Stores and Specialty Softlines space illustrated by the data since 2014 highlights the seismic shift away from legacy Brick & Mortar retail with mall based retailers scrambling to drive sales through promotion and Omni-channel. Larger picture, average Holiday traffic across our sample of 11 retailers under coverage has moved from positive low single digits in 2014 to flattish in 2015 to negative mid-single digits in 2016. Near-term and consistent with our field work, 4Q16-to-date has been a tale of two worlds with traffic down – 6.0% in aggregate from Nov 1 through Dec 4 given the warmest November in 25 years improving to -3.2% in the week of Black Friday.

JPM’s key takeaways:

  • Take 1: Satellite Data Illustrates Multi-year Brick & Mortar Traffic Decline: Over the past 3 years, department stores and specialty retailers have seen a material shift in trends away from brick and mortar as illustrated by satellite traffic data herein. Specifically, within the holiday time frame of 2014 six of 11 retailers tracked in the data showed positive traffic moving to declines at 11 of 11 retailers in 2016. We attribute these changes to a shift to e-commerce spending and greater competition namely driven by Amazon.
  • Take 2: Foot Traffic Pre vs. Post-Election Unchanged w/ Weather to Blame: Consistent with historical precedent, the 2016 presidential election created significant disruption in retail as illustrated by Figure 5 and Figure 6 herein. Specifically several retailers (i.e. BIG, SIG) spoke to postponing marketing to the post-election period (anticipating disruption) embedding early November softness into plan as a result. Digging into the data, retailers in the sample showed negative -4.5% traffic on average in the pre-election time period with DDS, BIG, and M the weakest. While post-election traffic data stagnated at -4.5% on average vs. the pre-election timeframe which we also attribute to the warmest November in 25 years according to Weather Trends International.
  • Take 3: Early November Challenged w/ 2H Cutting the QTD Deficit In Half: Weeks 1-3 of November were challenging by our work, and supported by satellite data down -6% in November in aggregate (a slight improvement versus October – 6.5%), driven by a combination of the warmest retail start to 4Q in 25 years and election marketing dollar shifts. Digging in, we believe many retailers started below plan with some worse than others with satellite brick and mortar traffic trends pointing to softer trends at DDS, BIG, and M – noting this does not account for ecommerce.
  • Take 4: Black Friday Strength w/ Traffic Winners & Losers: Our store work points to a strong Black Friday (11/27 Boss’ BF Weekend Eye – Consumer Win w/ Dec For All the Marbles; Field Work Pictorial) supported by satellite traffic data with many retailers making up for early November softness. Specifically, traffic improved to -3.2% over the Black Friday week versus -6.0% for November as a whole – consistent with our recent Chicago Mall Tours (12/6 J.C. Penney Co., Inc.: Digesting the Data Points: Tour Takes & Mgmt Follow-Up Points) and JCP speaking to “most retailers now within spitting distance of guidance”. Digging in, primary category winners over the Black Friday weekend  by the satellite date were the moderate department stores (JCP/KSS) and Off-Pricers (TJX/BURL) with M and DDS traffic remaining softer. Looking ahead, weather slated to be favorable in December with WTI’s forecast calling for temperatures 10-15 degrees lower YOY in weeks 2 and 3 boding well for traffic trends (and cold weather apparel sales).

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