Well before retailers officially report their holiday sales results, Wall Street analysts and other retail observers regularly scour stores for telltale clues on whether sell-throughs are going as planned.
To a large degree, markdowns levels are being gauged. Wall Street Strategies' Brian Sozzi tells CNBC that he analyzes whether promotions were in line with where management of the retailer is guiding him while also eyeing any "abnormalities" in markdown levels. For example, an excessively high markdown rate -- upwards of 70 percent -- serves as an omen that a profit warning may be forthcoming. Markdown rates of around 40 percent were seen as more likely to be part of a planned markdown strategy. Finding less-than-professional looking markdown signage was also a sign of excessive promotions, according to an article in the Wall Street Journal.
Speaking to the Journal, Richard Jaffe, at Stifel Nicolaus, said he looks at which items don't go on sale for an indication of what categories are doing well. Christine Chen, at Needham & Co., looks for items on clearance racks that have remained in stores well past their season as a sign of a fashion miss.
Empty shelves late in the season were also generally seen as a sign of not only healthy sales but also that inventory levels weren't over-planned.
Traffic, according to the Journal article, "can be fickle, changing by the day and even by the hour," but is also an obvious sign of healthy shopping. Mr. Sozzi checks parking lot levels on key days like Black Friday for evidence of shopping vigor. Particularly busy checkout lines inside individual stores were also seen as signs of a strong season for a store.
Finally, unkempt sales floors, such as those found by the Journal at Victoria's Secret, were generally seen as a good sign. In theory, sales associates were deemed too busy checking out customers to properly service the floor. But much depends on the retailer. For instance, John Morris, at BMO Capital Markets, saw sloppy tables at the Gap chain as a sign that Gap Inc's moves to cut staffing in a cost-cutting effort was having a detrimental impact on service levels.
"It's 2 p.m.," he told the Journal. "Someone should be putting this table together."
Discussion Questions: Do you have any of your own favorite telltale signs when walking retail stores that say its performance is running above or below plan? What are some lesser-known indications? How do you recommend industry-watchers "shop" a store for retail knowledge?