Retail's Slowdown Creeping Upscale

|
 |  Includes: APPB, BC, CAKE, COH, JWN, PFCB, PNRA, WSM
by: Robert Zenilman

Rob Zenilman submits: In today's Wall Street Journal, Justin Lahart & Amy Merrick's Consumers Curb Upscale Buying As Gasoline Prices, Housing Bite discusses how $3 a gallon gasoline and a weak housing market is causing more headaches for retailers & restaurants - only now it's hitting the middle class. Examples include:

  • Boat builder Brunswick (NYSE:BC) and upscale sandwich shop (NASDAQ:PNRA) have both seen their stocks hit after reporting disappointing sales.
  • P.F. Chang's China Bistro (NASDAQ:PFCB), Applebee's (APPB) and The Cheesecake Factory have all issued sales warnings.
  • Williams-Sonoma's (NYSE:WSM) Pottery Barn recently lowered its Q2 revenue forecast from $842mm-$856mm to $823mm-$837mm.

In contrast, higher-end retailers like Nordstrom (NYSE:JWN), Neiman Marcus and Coach (NYSE:COH) are still reporting strong sales.

Comment: Until now concerns were limited to the lower end retailers, such as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). July's retail sales figures showed that the stronger gains were at the higher-end stores, at the expense of the lower end. Sustained high priced gas and a slow housing market will accelarate the trend, with only the high end remaining immune to its effects.