By JP Morgan
U.S. Retail Sales Data Review (See within for detailed quarterly and monthly retail sales analysis):
• Retail Monthly Sales Softening, Directionally Consistent w/ MasterCard Spending Pulse Data. October retail sales growth (ex auto) decelerated 300bps sequentially to 0.5%. Controlling for a tough Sept/Oct sequential compare in the prior year, we estimate October retail sales growth decelerated ~100bps sequentially. Excluding auto and gasoline sales, we estimate October retail sales growth decelerated 70bps sequentially to 0.5%, on a 50bps easier (sequential) compare from the prior year period. Census Bureau statistics are directionally consistent with MasterCard’s October Spending Pulse survey released earlier this month.
• No Surprise, Discretionary Remains Weak... Discretionary spending growth continues to decelerate and, in some cases, contract from the prior year period. Home furnishings and electronics, which collectively account for roughly 6% of retail sales and are generally view as the most discretionary purchases, contracted 13.5% and 5.6%, respectively, from the prior year period, versus an 11.5% and 2.4% y/y decline in September, continuing a trend of decelerating growth. Clothing, which accounts for roughly 7% of retail sales, declined 4.0% from the prior year period, a 60bps deceleration from the revised September figure. October food service sales, which represent roughly 14% of retail sales, increased 3.9% from the prior year period. October food service growth was roughly flat to the revised September figure.
• …But Staples Holding Up Relatively Well. The less discretionary categories (e.g., food and general merchandise) are seeing some softness, but are generally holding up well. Food (and beverage) and general merchandise sales, which collectively account for roughly 36% of retail sales, increased 4.8% and 2.3%, respectively, from the prior year period, decelerating about 70bps each from September.
• Gasoline Could Be Swing Factor, Worth Monitoring. Gasoline sales were roughly flat to the prior year period, but October gasoline sales growth decelerated 17 points sequentially from September, as gas prices declined and consumers filled up less. We believe this is a trend worth monitoring as it could have a meaningful impact on MasterCard's December quarter domestic purchase volumes and Visa's March quarter domestic purchase volumes. We believe gasoline purchases represent 10-15% of Visa/MasterCard domestic purchase volume.
First Data 3Q Earnings Call Takeaways:
• U.S. Merchant Services trends. Transaction growth was up 9% in 3Q (vs. up 11% in 2Q08), which decelerated throughout the quarter -consistent with broader trends in the industry. By type, credit was up 6%, PIN-debit up 17% and prepaid up 36%. Not surprisingly, October slowed (but still positive according to management) and First Data gave some trends by category: (1) general retail same store declined 2% in Oct. vs. being flat in Sept., (2) discounters and wholesalers saw same store growth of 3%
U.S. Retail Sales Data Review (See within for detailed quarterly and monthly retail sales analysis):
• Retail Monthly Sales Softening, Directionally Consistent w/ MasterCard Spending Pulse Data. October retail sales growth (ex auto) decelerated 300bps sequentially to 0.5%. Controlling for a tough Sept/Oct sequential compare in the prior year, we estimate October retail sales growth decelerated ~100bps sequentially. Excluding auto and gasoline sales, we estimate October retail sales growth decelerated 70bps sequentially to 0.5%, on a 50bps easier (sequential) compare from the prior year period. Census Bureau statistics are directionally consistent with MasterCard’s October Spending Pulse survey released earlier this month.
• No Surprise, Discretionary Remains Weak... Discretionary spending growth continues to decelerate and, in some cases, contract from the prior year period. Home furnishings and electronics, which collectively account for roughly 6% of retail sales and are generally view as the most discretionary purchases, contracted 13.5% and 5.6%, respectively, from the prior year period, versus an 11.5% and 2.4% y/y decline in September, continuing a trend of decelerating growth. Clothing, which accounts for roughly 7% of retail sales, declined 4.0% from the prior year period, a 60bps deceleration from the revised September figure. October food service sales, which represent roughly 14% of retail sales, increased 3.9% from the prior year period. October food service growth was roughly flat to the revised September figure.
• …But Staples Holding Up Relatively Well. The less discretionary categories (e.g., food and general merchandise) are seeing some softness, but are generally holding up well. Food (and beverage) and general merchandise sales, which collectively account for roughly 36% of retail sales, increased 4.8% and 2.3%, respectively, from the prior year period, decelerating about 70bps each from September.
• Gasoline Could Be Swing Factor, Worth Monitoring. Gasoline sales were roughly flat to the prior year period, but October gasoline sales growth decelerated 17 points sequentially from September, as gas prices declined and consumers filled up less. We believe this is a trend worth monitoring as it could have a meaningful impact on MasterCard's December quarter domestic purchase volumes and Visa's March quarter domestic purchase volumes. We believe gasoline purchases represent 10-15% of Visa/MasterCard domestic purchase volume.
First Data 3Q Earnings Call Takeaways:
• U.S. Merchant Services trends. Transaction growth was up 9% in 3Q (vs. up 11% in 2Q08), which decelerated throughout the quarter -consistent with broader trends in the industry. By type, credit was up 6%, PIN-debit up 17% and prepaid up 36%. Not surprisingly, October slowed (but still positive according to management) and First Data gave some trends by category: (1) general retail same store declined 2% in Oct. vs. being flat in Sept., (2) discounters and wholesalers saw same store growth of 3%
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