Posted on 05/06/2010 6:48:11 AM PDT by blam
Retail Sales Confirm That Wall Street Got WAY Too Optimistic About The Recovery
Vincent Fernando, CFA
May. 6, 2010, 9:40 AM
After March same store retail sales (SSS) rose by a 9.1% year over year thanks to an early Easter, analysts had far more subdued expectations of 1.7% growth for April according to Reuters.
Yet the majority of retailers who have reported so far have missed these lower expectations. According to the data below sourced from CNBC, 15 companies have missed their same store sales expectations vs. 9 meeting or beating expectations.
13 companies have reported negative year over year SSS, while only 9 reported growth.
Standout outperformers have been Gap (GAP) and Aeropostale (ARO):
While some ugly misses have come out for Costco (COST), Dillards (DDS), Abercrombie (ANF), and Hot Topic (HOTT):
[snip]
(Excerpt) Read more at businessinsider.com ...
I admit, I’m not the best of retail stock pickers out there. That’s because I really don’t “get” modern retail.
Here’s how I learned that I don’t know a damned thing about modern retail:
Wife and I go into a mall (in Billings, MT) in January 2009 and we start walking around. And around. And around.
About the third time we’re completing a circuit around the mall, two things converged in between my ears:
1. The majority of stores and the clear majority of merchandise (as measured by individual items, not the value of the items) are targeting one narrow consumer demographic: young women. We’re talking 16 to, oh, 25 or so.
2. The stores were all trying to out-discount each other, with sales of “up to 70% off!” hanging in every store window. What they were discounting varied - you’d see some stores trying to out-70% their neighbors, and others would have the same item at “only” 55% off. Of course, the base prices varied a bit.
Most all of the clothing was stuff that young women are wearing... I don’t know when. Perhaps when they’re strolling along a street corner, seeking to turn tricks, I dunno. There were little to recommend much of the clothing that was on sale other than it was cheap. Even at the vastly reduced prices, I thought most all of it was a dubious value, because there wasn’t much actual fabric being sold in any of these items.
Anyway, I then started mentally racking up how much square footage in this one mall was devoted to this one narrow consumer demographic. And it was really very remarkable to me, because this demographic has very little organic earning potential relative to the amount of merchandise that had to be moved to keep all these stores afloat.
You have any daughters?
I can proudly say I have not been to a mall of any kind in 3 years.
2. The stores were all trying to out-discount each other, with sales of “up to 70% off!” hanging in every store window.
They are the most impulsive spenders, even though they usually have little (of their own) money. So a small retailer without a lot of experience doesn't really have to know what he or she is doing to sell to this demographic. Open a space, put up some flashy graphics, and the money rolls in - albeit slowly.
Selling to older, wealthier demographics can be much more lucrative, but you have to work a lot harder to get them to buy.
No, and if I did, they would not be permitted to wear the majority of what I see sold for young women.
We will soon be lined up outside government run malls awaiting the next ‘shipment’.
The question I kept asking my wife was “OK, I’ll take it at face value that they’re impulsive shoppers. From where are they getting the money to spend on this stuff? Where did this narrow demographic get the money to support all these stores before 2007?”
That’s what finally got through to me: so many stores, chasing the limited spending ability of such a narrow demographic - OK, I’ll proffer that they lack any and all impulse control limitation on their spending.
But where do they get the money necessary to support so much retail square footage? I would say that in my EE-math-trained-mind, about 40% of the retail footage in this mall was targeting the young female shopper.
Even with credit cards, how could so much retail footage be propped up on such a narrow demographic with so little earning power?
Only in the inner-cities, à la 1968. This is precisely why Jefferson loathed the big city. He knew it a breeding ground for gluttony, sloth and malcontent - a place where consumers far outnumbered producers and where the demand for government intervention would be greatest.
Well, I think a parenting style has taken over - give the girls money and send them to the mall to keep them out of the house.
Parentheses mean negative numbers, I believe.
IMHO, nothing impacts consumer spending like the price of oil, and it was the (suspicious) massive oil increases in the Summer of '08 that really sent the economy into a tail-spin.
If the economy is really growing at 3%, why are oil prices so low? Increased demand with reduced supply should increase prices, right?
You’re a lucky man. But, you’ve not been tested until you’ve gone through that segment of hell!
Ah, thanks. They’re debit numbers. Well I guess Abercrombie discovered the value of discounting a little too late then. Even sex doesn’t sell everything.
I'm 66 and haven't been to a mall in 20+ years.
The Recession that followed the Crash of ‘29 gave way to Happy Days Are Here Again and then the slide of ‘32- and so it went until the War when there were some years of Full Employment Depression followed by more recession until Eisenhower took off the worst of the New Deal regulations and it changed to general prosperity interrupted by recessions instead of Depression interrupted by weak Recoveries. I think the process is changing again but not to something new.
You mean like this?
What? You don't understand the power of SkankWear?
Copper, a leading-indicator metal, is off dramatically too.
My wife and I have stayed out of indoor malls since 9-11.
The increase in GDP is entirely an increase in government spending. I suspect that actual GDP, excluding government spending has been in continuous decline since the bust. The government increase must push down the productive sector because it is grossly inefficient allocation of resources.
Any riots here will be different. When the rioters invade certain neighborhoods they will be met with non rubber bullets.
>>I admit, I’m not the best of retail stock pickers out there. That’s because I really don’t “get” modern retail.<<
I’m with you. I go to the mall on occasion and may even buy a latte. I don’t buy other stuff at a mall. Haven’t spent more than a few hundred dollars total at malls for the last couple of decades.
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