Futures up indicating a higher open.I don't see it holding much past 10 am.
Nothing has changed from yesterday. This is just a small, technical bounce before we fall further. DOW should ultimately close down about 120 points or so.
SHLD should suffer the next couple of years. KM still seems to be the same old trashy store. Some longer term puts could pay off very nicely from 180.01.
There are lots more retailers that will get hurt down the road. The stories are just starting to develop, much like the HBs.
Note the S&P retailing index is up for the year. Lots to look at
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Home Depot, Wal-Mart May Suffer as Mortgage Woes Hit Customers
By Heather Burke
March 29 (Bloomberg) -- Al Ynigues bought his first house in 2004. Since October, his monthly mortgage payment has climbed 16 percent, to $2,417. It will rise again April 1.
Ynigues, 65, makes $2,800 a month as a self-employed music teacher. He says he eats once a day, has stopped paying his utility bills, and is late on payments for his home in Apple Valley, Minnesota, 20 miles south of St. Paul.
``My mortgage has changed everything,'' said Ynigues. ``It's really demoralizing.''
Ynigues is one of about 800,000 U.S. homeowners who took out so-called subprime mortgages and now are struggling to make monthly payments. As these consumers spend less on products including home furnishings and clothing, sales of retailers such as Home Depot Inc. and Wal-Mart Stores Inc. may suffer.
``There'll be more of a focus on necessities like food,'' said Howard Davidowitz, chairman of New York-based retail consulting firm Davidowitz & Associates. ``People are going to be squeezed.''
Delinquencies among subprime borrowers, who tend to have tarnished or limited credit histories, hit a four-year high in the fourth quarter, the Mortgage Bankers Association said March 13. Foreclosures on all types of home loans rose to a record.
Home-improvement stores and retailers selling to people in the subprime-borrowers' income bracket may feel the biggest pinch. ``If you are a subprime borrower and your home is repossessed as thousands have been, you aren't going to be buying at Home Depot,'' said Davidowitz.
Home Depot spokesman Jerry Shields said the company doesn't comment on specific housing industry trends.
Home Depot
Atlanta-based Home Depot, the world's largest home- improvement retailer, said last month it expects its first annual profit drop since at least 1990 this year, citing the housing market. The company said profit will decrease this year to as little as $2.55 a share from $2.79, or $5.76 billion, last year.
Home Depot shares have fallen 8.4 percent this year, compared with a 1.3 percent rise by the Standard & Poor's 500 Retailing Index.
Wal-Mart, the world's biggest retailer, may lose sales of products including clothes and DVDs, said Patricia Edwards, a money manager with Seattle-based Wentworth Hauser & Violich. The firm manages $9 billion, including Wal-Mart shares.
Wal-Mart spokesman John Simley declined to comment. The Bentonville, Arkansas-based company will report March sales on April 12. Wal-Mart in 2006 had the smallest same-store sales gain in at least 27 years. Its shares have increased 1 percent this year.
Spending Slows
U.S. retail sales growth may slow in 2007 to 4.8 percent, the smallest gain in four years, the Washington-based National Retail Federation said in January. The figure excludes cars, gas stations and restaurants. Retail sales account for almost half of consumer spending, which makes up two-thirds of the U.S. economy.
Subprime defaults climbed after lenders issued mortgages to people with poor credit, often with so-called teaser deals including small or no down payments and low but adjustable interest rates.
Those borrowers may face an average monthly increase of $400 as the adjustable mortgages reset at higher rates in the next two or three years, said Christopher Cagan, research director at First American CoreLogic, a mortgage-risk data provider in Santa Ana, California.
As many as 2.4 million Americans may lose their homes because of the collapse of subprime lenders and foreclosures, Mike Calhoun, president of the Durham, North Carolina-based nonprofit Center for Responsible Lending testified to Congress this week.
`Trading Down'
Subprime borrowers' woes also may curb business at casual- dining restaurants targeting low-income consumers, according to a March 19 report by JPMorgan Chase & Co. Applebee's International Inc. has more low-income consumers than its competitors, JPMorgan said.
Same-store sales at Applebee's, a chain with more than 1,940 restaurants, declined in 10 of 12 months through February. Applebee's spokeswomen Carol DiRaimo and Laurie Ellison didn't return messages seeking comment.
``You see a clear trend of people trading down,'' CKE Restaurants Inc. Chief Executive Officer Andrew Puzder said in a March 23 interview. CKE operates Carl's Jr. and Hardee's fast- food chains.
`Limited Impact'
Spending may be curbed at Dollar General Corp., Family Dollar Stores Inc. and Dollar Tree Stores Inc. because of higher subprime payments, JPMorgan said.
``It's difficult to determine any impact,'' said Family Dollar spokeswoman Kiley Rawlins. Family Dollar, which operates 6,300 discount stores, has customers with annual incomes averaging less than $30,000.
Dollar General spokeswoman Tawn Earnest and Dollar Tree spokesman Timothy Reid didn't return telephone messages.
Leisure industries also may be hurt. Carnival Corp., the world's largest cruise-ship company, reduced prices on Caribbean trips this month after U.S. consumers cut back on vacation spending.
Consumers ``are still feeling the impact of higher prices at the pump, higher interest rates, mortgage payments and real estate taxes,'' Carnival Chief Operating Officer Howard Frank said March 16. ``The subprime problem is probably playing some role.''
Cruises or shopping may be the last thing Ynigues, the Apple Valley, Minnesota, homeowner facing higher monthly payments, has on his mind.
``I'm fighting to save my house,'' he said.
To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net . |
