U.S. Retail Industry Numbers: 663 Store Closings, 967 Store Openings, 4 Chapter 11 Filings, Sales Surprises, Conflicting Conclusions, and Recovery Remarks

There may not have been a lot of sales in the U.S. retail industry in the first two weeks of 2010, but there were plenty of numbers. Unlike this time last year, 2010 store closings are in the hundreds, instead of the thousands, job cuts are in the thousands instead of the tens of thousands, store opening plans far outnumber store closing activities, and global stores openings are planned in every developed country.

But even though we're all desperately seeking recovery, Chapter 11 filings and unemployment continue, while numbing numbers and hasty headlines are giving false positive signals that create inflated hope and lead to disappointment. Disappointment is not really good for the consumer psyche right now.

Watching retail numbers spin out of the U.S. retail industry in the past couple of weeks was like watching an episode of "The Bachelor" reality show. It's equally as humorous to watch seemingly intelligent women conclude that they have met their happily-ever-after soulmate at the end of one date as it is to watch seemingly intelligent retail experts conclude that the retail industry is in recovery after any less-than-horrible number is reported.

Christmas week sales were up 2.3%. "Recovery!" Holiday sales estimates predicted a positive 3.6%. "Recovery!" Same store sales were up 2.9%. "Recovery!" Online sales jumped 5%. "Recovery!"

But just like it always happens with The Bachelor's harem too, reality crept into the retail industry, and premature conclusions proved themselves to be sadly uninformed. Month-over-month, December sales were actually down, unemployment is stuck at record high levels, and adjusted for inflation, the full year of 2009 sales is at 1999 levels. That doesn't add up to happily-ever-after to me.

Two days before these reality numbers hit the retail industry last week, economist Mark Zandi stood in front of the 99th annual National Retail Federation (NRF) Conference and reportedly told a room full of retail industry professionals, "The economy today is measurably better than a year ago." Really, Mr. Zandi? Better?

In December 2008 the unemployment rate was 7.2%. In December 2009 that rate was 10%. According to my calculator, Mr. Zandi, that's 3.9 million more people who don't have a regular income this year than a year ago, which is not exactly "better" by any measure.

In 2009, businesses filed bankruptcy papers 89,402 times, which was nearly a 40% increase from 2008. Explain to us, Mr. Zandi, if the economy is better than it was a year ago, why did the number of personal bankruptcy filings increase by 32% in 2009 and why does the American Bankruptcy Institute expect that to increase even more in 2010? If the ABI is correct, more than 1.4 million additional Americans will be bankrupt and living with a trashed credit rating by the end of 2010. That doesn't seem to be better, Mr. Zandi, but I'm sure you have some kind of an extrapolation that tells you why it is.

If things are measurably better now, then why are 871,086 more people without their homes, their equity, and their housing investment at the end of 2009? This is on top of the 861,664 people who had their homes repossessed in 2008. If renting is better, homelessness is better, and moving down on the socioeconomic ladder is better, then I guess you're right that life for these people is measurably better, Mr. Zandi.

There is one thing that is notably better than last year, and that is the stock market. That could be considered a positive point to support Mr. Zandi's position except for one thing. The stock market, as has been dramatically illustrated more than once in the past two decades, is not really a reliable economic indicator as much as it is a legal form of institutionalized gambling.

I'm sure Mr. Zandi would want to remind me at this point that unemployment and retail sales are lagging economic indicators and then pull out lots of graphs and numbers that prove that his economic conclusions are correct. To that I would have to remind Mr. Zandi that he delivered his "measurably better" message to a retailing audience, and that retailing can never be reduced to numbers and charts because there are people involved. People are not numbers, human beings can't be quantified, and the "laggards" aren't really in a big spending-consuming mood. It's the people whose lives are "measurably worse" that are causing the reality of recovery to be out of line with economic calculations, estimations, and predictions.

So what are retailers supposed to do with all of this conflicting data and all of these mixed messages? Hopefully, they're ignoring the numbers and paying attention to their customers. To average consumers, "the economy" doesn't extend beyond their own personal financial statements. And despite what any economist says in any keynote speech, if average American consumers were asked to describe their personal finances, I find it hard to believe that a great number of them would actually check the box that says "measurably better."

Leaders of publicly traded retail organizations know better than to get all twirled up in industry numbers and those who analyze them. But retail onlookers might think that all of the numbers and conclusions that have been flying around in the past few weeks seem conflicted, crazy and chaotic. For these people, a book like "The Retail Industry Numbers for Dummies" would be helpful.

It might seem like this would be one dull book, but really a "Retail Industry Numbers for Dummies" manual would be a very quick read because it would only need to contain about five points and five paragraphs:

#1 - The NRF and ICSC are industry trade organizations and will always spin numbers and facts in a way that will shine the most positive light on their retail industry members. Assume the numbers from these organizations are always skewed to the positive.

#2 - Same store sales are the most largely ineffective measurements in existence and shouldn't be considered a meaningful indicator of much of anything. Follow the lead of stock analysts and investors and largely ignore monthly same store sales numbers.

#3 - Analysts are "disappointed" much more often than not. Consider analysts' predictions to always be overly optimistic.

#4 - Most of the media is more interested in good headlines than good understanding. Consider their conclusions to be inappropriately broad, and hastily drawn.

#5 - Economists live in a world of numbers and theory, but human beings do not. Since the warm-blooded part of retailing can't be quantified, economists' conclusions are almost always incomplete when it comes to retailing.

With these five guidelines in mind, the numbers that came out of the U.S. retail industry in the past few weeks make a lot more sense.

Out of 80 economists asked to project December's retail sales numbers, 80 of them were wrong, according to Reuters. I would say that even that number is wrong because by my calculations, the total should be 81, after hearing what Mark Zandi had to say at the NRF convention.

We're glad that the recession is over on paper, Mr. Zandi (and Mr. Bernanke), but paper isn't people, and telling people in diminished circumstances over and over again how much better the economy is, isn't very endearing. And making business decisions based on paper reality rather than people reality is not very wise for the U.S. retail industry. The U.S. economy can't afford for the U.S. retail industry to make major missteps because it is the one industry saddled with the contradiction of being both a leader and a lagger in recovery.

Until the lives of consumers are actually "measurably better," retailers can't believe in that reality because if they do, they will lose touch with the needs and expectations of their customers, and then they will lose those customers. That is the non-extrapolated reality of this year's retail reality show.