RodgerRafter on the FOOL writes about retail sales:
Scientific Method:
1. Observation and Description of a phenomenon: The Republicans have been in office for 4 years.
2. Formulation of a Hypothesis: The working and middle classes are getting squeezed.
3. Use Hypothesis to Predict Other Phenomena: Retail Sales will suffer and we'll head into a consumer driven recession.
4. Perform tests of predictions: Track retail sales progress.
We've made our hypothesis in advance:
boards.fool.com
Time to check some data, analyze and make more predictions:
biz.yahoo.com
The nation's retailers had a disappointing start to the holiday season, reporting sluggish sales for November as a hoped-for surge in Thanksgiving weekend business failed to materialize.
Wal-Mart Stores Inc., the world's largest retailer, reported a meager 0.7 percent increase in sales at stores open at least a year,
Costco Wholesale Corp. reported same-store sales were up 5 percent, slightly below the 5.8 percent Wall Street estimated.
Limited Brands suffered a 5 percent decline in same-store sales, far worse than the 4.8 percent increase Wall Street expected.
The Bombay Co., which sells home acccessories and furniture, posted a 13 percent drop in same-store sales,
Keep in mind that same store retail sales normally go up with inflation, so a store reporting a less than 2 percent increase is likely selling less stuff.
If the working and middle classes are getting squeezed it isn't surprising to see Costco, who sells mostly essential stuff like food and gas, still showing good numbers. 5% is probably a more accurate measure for inflation anyway, given their product mix. At least at the store in my area, gas is a fairly recent addition and gas has been a huge seller for them (always long lines for 16 pumps).
Wall Mart sells a lot of essentials too, like food, but also sells cheap consumer stuff, which is likely where they are hurting.
The Limited and Bombay go progressively further into the realm of things you don't really need when money is tight. Its not surprising to see them showing bad numbers. We saw in the income and spending report that durable sales were suffering in October, and that trend probably continued through Novermber.
A lack of discounting has been blamed for the lack of sales, however, we've seen that inflation has been very high (20%+) at the producer level, even though it has been low at the consumer level. Pricing pressure is already tight all the way through the supply chain.
High gas prices are cutting into people's budgets.
Credit card interest rate hikes are scaring the crap out of many deeply indebted consumers.
Predictions for the holiday season:
Outside of going-out-of-business sales, we won't see much discounting because margins are already too tight.
Late in the season, retailers could get desperate to unload merchandise because of cash crunches.
Consumers will buy much less than they have in past holiday seasons.
Those who sell the necessities won't do nearly as badly as those who sell non-essentials, like electronics, furniture and vehicles.
It won't be a meltdown, but in January we'll be reading long lists of retail bankruptcies. |
