Ted Hurlbut

Back-to-School Retail Winners

I agree with much of this, although I'm not as confident in the market position of TGT at the moment. ARO, BBY and URBN are all spot on, while TRLG is a reasonable counter-intuitive call. The one that is missing, in my judgment, is The Buckle (BKE). I would anticipate continued good top-line results from them. Otherwise, it looks to be a challenging back half for much of retail.

Note to Sears: Nobody Needs More Stuff

My links didn't post, unfortunately. You can read more about these issues on my blog, Retail Perspectives, at www.hurlbutassociates/.... The two posts I tried to reference above are "Zombie Stores and Zombie Space" and "Has A Fashion Apparel Bubble Burst".

Note to Sears: Nobody Needs More Stuff

Retailers in every discretionary tier and sector are facing the same challenge. Discretionary sales have nose-dived and there's good evidence that those sales aren't coming back anytime soon. Stores are left with half-empty racks and shelves and square footage that's turned into zombie space. Apparel, in particular, appears to be in trouble. Shopping fashion apparel today is to witness what looks like the aftermath of a bubble bursting. I've written more about these issues here
and here.
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Analysts Too Negative on Apparel Makers

This sector is so tied to retail that it's hard to imagine one moving without the other. Both sectors have moved because aggressive cost cutting has buttressed earnings. There's not much more upside for earnings, however, until the top line begins to move again. Unfortunately, retail revenues continue to decline as the consumer spending lags. This is not going to turn quickly, and when it does the recovery in consumer spending will be a long, hard slog.

Retail Figures Show Continuing Consumer Deterioration

The only comment I would make is that WMT's SS aren't so surprising when you reflect back on other retail sales metrics that we saw for May, June and July. June and July were particularly weak. So your analysis, while not wrong, is backward looking, and confirms those prior metrics. Granted, there's nothing out there at the moment that would signal and consumer rebound on the immediate horizon, but that's what we're all looking for now.

Teen Retailer Aeropostale Thriving in the Recession

Aeropostale is one of the few specialty retailers thriving through this period. Forever 21 and The Buckle are a couple of others. What they have in common are fast turns, moderate price points, and the ability to respond rapidly to trends..

Deflation at Work

From this vantage point, it’s hard to see much energy in the retail sector. Consumer’s remain in their bunker, coming out only occassionally to cherry-pick the latest half-off sale.

Retail prices are coming down. Supply still greatly exceeds demand. This is also going to push first costs and raw materials down.

This is what happens in a recession. Stimulus is meant to pump demand. On the consumer side it has not (yet) had much of an impact.

This recession appears to be leading to a fundamental restructuring of consumer’s priorities, spending patterns and shopping behavior. Retail right now is starting to feel like the other bubble that burst, a bubble slowly built up over the past couple of decades.

If that's so, deflationary pressures on consumer goods will persist until we've achieved an equilibrium of supply and demand, at demand levels below what we've experienced over the past decade.

Three Ways to Profit from the Drop in Consumer Spending

From this vantage point, it’s hard to see much energy in the retail sector. Consumer’s remain in their bunker, coming out only occassionally to cherry-pick the latest half-off sale. The consumer isn’t going to lead us out of this recession, they are going to lag. The recovery will have to be led from elsewhere. Of greater concern is that this trauma appears to be leading to a fundamental restructuring of consumer’s priorities, spending patterns and shopping behavior. Retail right now is starting to feel like the hidden bubble that also burst. The recession of ‘81-’82 led to fundamental shifts in spending patterns, and the structure of the retail industry. This one feels much the same, if not even more significant.

Sales Drop at Wal-Mart

This is a bit curious. Investors have been treating WMT as a counter-cyclical play for a while now, so a drop in their comps would make sense if it corresponded with improvement in other retailers comps, like Penney or Kohl's. But that's not the case. It's important to note that much of WMT's strength up to this point has been in food. Could this be more of a food story than a general merchandise story?

Retail Sales Disappoint - Again

WalMart is facing the same headwinds as everybody else. Retailers have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. This is not likely to be reversed any time soon, and until then retailers have to scratch and claw as best they can.

July Retail Sales Disappoint; Near Term Improvement Unlikely

Retailers have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. This is not likely to be reversed any time soon, and until then retailers have to scratch and claw as best they can.

Wal-Mart Beats Despite Slight Decline in Revenue

WalMart is facing the same headwinds as everybody else. Retailers have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. This is not likely to be reversed any time soon, and until then retailers have to scratch and claw as best they can.

If Wal-Mart Isn't Recovering, How Can the U.S. Economy?

Retailers have absolutely no pricing power right now. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. This is not likely to be reversed any time soon, and until then retailers have to scratch and claw as best they can.

Earnings Preview: Macy's

The margin number is actually of more interest than the sales number. Clearly consumer demand has not yet picked up. Margins, on the other hand, are a good indicator of how willing consumers are to pay full retails. The fact that clearance inventories are down does not mean that consumers are going to be willing to buy fresh goods at full retails. Right now, it appears consumers know they don't have to. Wait, the price will be slashed before too long.

Retail Sales Forecast from a Fashion Perspective

I'd like to buy in, but what I'm seeing from fashion retailing is the customer buying items instead of outfits, trading down on basics and cherry-picking fashion retailers. As much pent-up demand as there might be for fashion, we won't know which direction the fashion consumer wants to go until they begin to once again pay full retails. That said, there has been a shift from accessorization that we saw as we were falling back into garments, which is a positive sign, but the consumer remains very cautious and discriminating, and units-per-transaction, price points and margins remain under intense pressure.