The Few Retail Standouts

As mentioned earlier, the retail sales reports this morning were largely weaker than expected, or at least weaker than consensus estimates. It is clear the the consumer is reigning in his and her purchases, so we should expect to see both weaker retail sales as well as weaker economic data in the near future.

There were only a few standouts in the reports this morning. BJ's Wholesale (BJ) posted +10.2% growth in same-store sales in October, but Costco (COST) posted a -1.0% decline. Children's Place (PLCE) also showed gains of +4.0%, as well as Wal-Mart (WMT) [+2.4%].

One of the common themes above is value and discounts. BJ's is a big wholesaler, and PLCE is a place where you can get kids clothes at discounted prices (I wonder if I can get my wife to go there?).

By contrast, traditional department stores, which are often sell full priced items, fared poorly. To wit, Nordstrom's (JWN) [-15.7%], Saks (SKS) [-16.6%], and Macy's (M) [-6.3%] all posted healthy declines. And teen retailers like American Eagle (AEO) and Abercrombie (ANF) also posted declines for October of -12.0% and -20.0%, respectively. Ouch.

Americans aren't used to seeing this, given that consumer spending held up fairly well during the last recession from 2001-02. Low interest rates spurred rising home prices back then, so consumer still "felt" like their net worth was growing.

But this time around the severity of the credit crunch is serving as a wake up call to many of the need to reduce debt. And for the first time in ages, the average consumer may once again be starting to reign in spending and actually think towards increasing their savings.

It's hard to say how long this will last, as we all know that Americans in general have a higher propensity to spend than most other nations. My guess is that when consumers feel that the housing market has bottomed, and the stock market begins to look past the recession, households will once again loosen the purse strings. But it will be a tough ride in the interim.

Comments

[brombonz:]

"There were only a few standouts in the reports this morning."

Hmmm. You're highly selective. Other "standouts" (assuming your standard is +4.0% or more) include APP +22.0%, BKE +14.5%, HOTT +8.3%, MWRK +6.0% and CTR +4.0%. In addition, on Thursday URBN reported its quarterly comp, +10.0%, with its Urban Retail division up 17.0% and the small Free People division up 4.0% (Anthropologie, at +2.0% was the drag on the corporate number).

APP has turned in a double digit comp every month since it made its first report in March (as well for the comparable month of the previous year), and for six consecutive quarters. BKE has turned in consecutive monthly double-digit comps since August 2007, preceded by similar results in March and June 2007. URBN, which reports quarterly, has had four consecutive double-digt quarters.

2008 Nov 08 06:04 PM

[Chuck-A-Luck:]

Nordstrom et. al. (luxury dept. stores) will feel the pain longer than the general economy. Cheap money created a nation of sophisticated yokels driving 8 mpg vans, eating $40 steaks, and wearing $200 blue jeans.
That time is over, and may not return for a long while.
The drunken frat-rat party of the Bush II administration has left a bad taste in our mouth. Woolen plaid shirts and sensible shoes will be more in vogue than acid-washed, pre-faded, pre-worn-out jeans.
Do they still have a piano player at Nordstrom's?

2008 Nov 10 11:56 AM