Garden State: How retail analysts look into their crystal ball

Wonder how retail analysts keep track of their companies? Other than quarterly financials, calls from the friendly IR department, the occasional visit to CEO and reading the weekly circulars? They try to visit retail locations as inconspicuously as possible. The Garden State Plaza in Paramus, N.J. is a favourite for NY- based analysts looking for a quick dip in the market.

    "... Thomas D. Lennox, the head of investor relations at Abercrombie & Fitch, jokes that on any given Friday afternoon "you will find more retail analysts at Garden State Plaza than on Wall Street and Midtown Manhattan combined."

    ... Retailing analysts and fund managers say they never base judgments - particularly recommendations to buy or sell a stock - on observations from a single mall. In interviews, half a dozen analysts said they visited at least three malls a month. But nearly all conceded that they returned, again and again, to Garden State Plaza, about a 20-minute drive from Midtown, making it perhaps the single most influential mall in the country."(NYT)

How do these analysts, seeking partial anonymity while strolling through the mall in "suburban dad" clothes, judge the success or failure of holiday marketing campaigns? How do they "develop" the qualitative data for their reports?

    "...In the world of retailing analysis, even the size of the sale sign has meaning, conveying what [Harris Nesbitt retail analyst John D. Morris] calls "levels of desperation." A large, bright sign positioned prominently outside the store in the mall's main corridor is "very desperate," whereas a small, unobtrusive sign, visible through a display window, conveys confidence."

Really, the analysts don't wield any specialist knowledge on the shop floor. The impressions they form are based on pricing, inventory and customer care signals that any experienced shopper can recognize.

    "... the peculiar craft of retailing analysis, in which a store's strength is measured through dozens of tiny, seemingly imperceptible signs, ranging from the size of a 50-percent-off sale poster (revealing how desperate a store is to clear out merchandise) to the number of unfolded shirts on the sales floor (indicating a store, perhaps fearing poor holiday sales, has cut back on employment and is understaffed)."(NYT)

There are weaknesses in relying on the Garden State Plaza, which Retail Traffic called "the patriarch of New Jersey's shopping centers." Thankfully, the NYT acknowledge's the mall unusually high average family income and other factors.

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