Fewer Rent Payments - But More Vacations

Same Store Sales Growth Falls

Redbook same-store sales growth in the week of September 5th fell sharply from 4.6% to -0.1%. Now we’re out of the back to school shopping season. It’s tough to glean much from one week of bad data after a string of good reports. Investors will be following the next few weeks closely to see how the increase in jobless benefits impacts spending. If the retail sales report matches the August Redbook results, growth will be strong.

Soon we will be seeing surveys on how much consumers plan to spend this holiday shopping season. There will likely be a decline in spending. Low single-digit growth would be a plus. By the time we get to November, the unemployment rate might be below 8%. The labor market will be stronger. The good news for physical retailers is that the pandemic occurred in the spring and the 2nd wave was in the summer.

There will be some social distancing this fall/winter. However, we can expect consumers to shop at stores still. This obviously depends on where the 7 day average of new deaths goes and how effective the new Abbott tests are. Those tests will start being used widely within the next 2-3 weeks. Abbott is hiring 2,000 new workers in Illinois to produce these tests. There is no update on how it’s going. It's likely there will be significant progress by early next month.

Consumers Are Ready To Go On Vacation Again

Everyone continues to wonder when the economy gets back to normal. There is extreme dislocation in the economy which is benefiting the housing industry, work from home stocks, and online retailers. It is hurting travel and everything else that involves human interaction such as office space and fragrances.

(Click on image to enlarge)

As you can see from the chart above, consumers are getting ready to go back on vacations. In the first week of September, the percentage of consumers comfortable traveling or going on vacation now increased from 26% to 36%. Percentage comfortable with traveling in 1-2 months fell 2 points to 44%. 

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