Retail Sales Stagnate, Walmart Gets Suggestive And Visa Stands By Interchange

Halloween has not so much happened yet, but that has not stopped a shocking and frankly dismaying number of Americans from jumping the gate and getting the drop on their Christmas, Hanukkah or Kwanzaa gifts. According to a recent poll by, 32 million Americans have already started their Christmas shopping.  

Wait, prepare to feel worse if you’re not part of that group. The same survey indicates that 4.6 million Americans are actually done with their holiday shopping already.

“We love to complain about stores putting up holiday displays earlier and earlier each year,” said Matt Schulz, senior industry analyst at “But the truth is that millions of Americans start holiday shopping long before the first Christmas tree appears in a store.”

Some people have a preternatural ability to look ahead.

However, the risk of constantly gazing into the future is that one runs the risk of missing the present. And because we would hate to see such a sad thing happen, we have the weekly rundown of the trending topics, guaranteed to keep you current and on the cutting edge (or your money back).

New Retail Sales Figures Show Slumping Spending

The Commerce Department has released its latest round of retail sales figures — and the results are less than wholly inspiring.

The new report indicates that sales barely budged last quarter, and producers reported their biggest declines in the last eight years. On the whole, retail sales were up only 0.1 percent in September, while August sales were revised down to show no growth, as opposed to the slim 0.2 percent increase initially reported last month.

Core retail (which corresponds most closely with the consumer spending portion of GDP), which includes retails sales minus automobiles, gasoline, building materials and food services dropped by 0.1 percent last month after a downwardly revised 0.2 percent gain in August.

With sluggishness now apparent in both September and August, economists are further trimming their Q3 GDP estimates, which had already been downgraded after the trade deficit (powered by a strong U.S. dollar) further increased.

“It suggests that consumers are beginning to tighten their purse strings,” said Millan Mulraine, deputy chief economist at TD Securities in New York. “This will be a particular concern for the Fed as this segment of the economy remains the key source of support for the economic recovery.”

The report was not all doom and gloom out of commerce. The figures also indicate the discretionary spending — on dining out, clothing and other non-essentials — appears healthy enough to balance out some of the loss of strength in international markets.

However, a separate report out of the Commerce Department did throw more light on a potential area of further concern: business inventories were essentially unchanged month-to-month between August and September.

Inventories increased by more than $100 billion in each of the last two quarters, a record back-to-back rise that has been ruled as unsustainable by industry watchers in the past.

Walmart’s Secret Plan For Sam’s?

Speaking at Walmart’s 22nd Annual Investment Community Day yesterday, CEO Doug McMillon said something vague — but suggestive — that managed to get Wall Street watchers talking about what the mega-retailer’s next move might be.

“We are more than open to re-shaping our portfolio,” McMillon said, according to The Street. McMillon further noted that Walmart stands ready to “evaluate its portfolio” of assets, before referencing Walmart’s long and proud history of getting out of assets deemed non-strategic, or putting the kibosh on stores that underperform.

McMillon’s “shocking” statement came as Walmart saw its stock decline 9.2 percent. All in, Walmart’s shares have fallen about 19 percent since the firm’s last investor day in October of 2013, as both sales and profits have decelerated. The nation’s most ubiquitous retailers currently project flat net sales growth for the current fiscal year — excluding currency fluctuations, growth is forecasted to be around 3 percent.

With Walmart looking to boost those figures, many are speculating that Sam’s Club may be a likely candidate to remove from the Walmart family. Revenue growth was up 0.5 percent in its last fiscal year, whereas Sam’s chief rival, Costco, saw a 6-percent increase over a similar period. For the past five years, Sam’s has lagged behind Costco’s growth — taking in $58 billion to Costco’s $110 billion. Moreover, Sam’s Club seems to be acting as a competitor to Walmart’s core business, instead of an extension of it, as it was intended to be.

“We want to be less of a Walmart,” Rosalind Brewer, chief executive of the warehouse-club retailer, told The Wall Street Journal back in August of this year, noting the firm’s move to cater to higher-end, more affluent shopper with a greater focus on name brands, organic food and higher grade merchandise.

With both Walmart’s CEO speaking publicly about re-organizing the portfolio, and Sam’s CEO chatting with reporters about getting distance from Walmart, some are wondering if a move by Walmart to spinoff their warehouse store brand is in the works.

Analysts note that the funds generated from that could be plugged into Walmart’s latest passion-investments in online and digital commerce. Walmart is projected to drop about $1.5 billion next year in 2016, following a $1 billion infusion this year.

Visa Stands By Interchange (Merchants Unsurprisingly Dissatisfied)

The Merchant Payments Coalition (MPC) is advocating for Visa to lower interchange fees, which is not really news.

Merchants (and groups representing them) have been advocating against card fees since the 1950s, when the American Hotel Association first complained about fees being charged by issuers through to the early 2000s, when scores of merchants filed lawsuits against MasterCard over claims that they rigged fees and prevented retailers from asking customers to use cheaper methods of payment in their stores.

But this newest complaint has a new twist — interchange fees should go down, because EMV has made the world a much, much safer place to do business.

In a hearing last week held by the U.S. House of Representatives Small Business Committee on EMV migration and its challenges for SMBs, Visa representatives fielded questions about the company’s  “high” interchange fees by ranking member Nydia Velázquez (D-NY).

Velázquez wondered why Visa has defended its high fees as part of the cost it incurs to provide fraud protection services. She further noted that “since fraud rates will go lower,” interchange fees should fall. The “fraud will go lower” part is a reference to the shift in the U.S. to EMV chip cards.

Visa VP for Risk Products Stephanie Ericksen pointed out that “fraud is one component of [interchange], including the credit risk of lending [those funds] to the cardholder.” Ericksen further remarked that “the criminals continue to invest in strategies to commit fraud as well, so we need to continue to invest in the ability to address that fraud. Even though EMV is one technology that is going to help drive fraud down, we need to continue to invest in other types of authentication technologies that continue to stay one step ahead of the criminals.”

Ericksen also argued “interchange fees are very competitive and incentivize participation from both issuers and merchants to participate in accepting electronic payments.”

Velázquez’s response: “I can’t help but laugh.”

The MPC was also apparently unimpressed with Visa’s response. In a release, the group claimed that high interchange fees drive up the cost of goods and services to all consumers, not just those paying with credit cards.

It’s a claim that is hard to substantiate one way or the other, as there is a little hard data on the subject.

A 2013 white paper written by economist David S. Evans, however, indicates that net-net, consumers actually did worse when interchange rates were lowered.  

Evans and his colleagues argued that while retailers would pass on some of their cost savings, they wouldn’t pass all of it on — by the NRF’s admission, retailers would keep more than 30 percent of those savings. Evans’ calculations, however, found that retailers would keep roughly half.  

On the other hand, fee increases or reductions of services from FIs could be easily predicted and further be predicted to offset and exceed any cost savings on the retail side of the equation. Said simply: Banks cut off from interchange revenue will not simply decide they need to take in less money, they will just start charging more for accounts and services.

According to Evans: “Last week’s flurry of articles on high ATM fees are one manifestation of the problem.”

So what is the moral of the retail story this week? Consumers are seemingly a little skittish about spending, though still willing to splurge (a little). Walmart may be gearing up for some major changes, meaning Sam’s could soon be a thing of the past. And merchants don’t like interchange fees, which is no surprise, but maybe consumers should — which kind of is a surprise.