Retail Bright Spots This Holiday Season

Nov. 30, 2008 3:27 AM ETWMT, GME, AAPL, SHLDQ, NDN, DLTR7 Comments
Mark Riddix profile picture
Mark Riddix

I know that we are in the midst of an economic recession and analysts are expecting a terrible holiday season for retailers. But I think that some retailers actually do okay. Will people shop as much as in years past? Obviously not. But I think the drop off will not be as bad as expected. The industries hardest hit by the downturn will be luxury items and electronics. Retailers such as Saks 5th Avenue (SKS) and Nordstrom (JWN) will find this holiday season particularly rough. Electronics retailers like Best Buy (BBY) and Circuit City (OTC:CCTYQ) have so much inventory on hand that they are being forced to slash prices as never before. Even with the price cuts, big ticket items such as flat screen televisions, laptops and appliances will probably have the greatest drop off in purchases.

But I think there could be some bright spots in retail. My opinion is that lower prices and new programs will encourage some consumers to shop places they have shunned in the past. I think that retailers like Sears and Kmart (SHLD) may actually benefit this holiday season due to bold programs. Struggling retailers Sears and Kmart have brought back layaway programs, extended business hours and are offering major price discounts. I think this a smart move. Any increase in sales no matter how small could be the difference between surviving this Christmas season and going out of business. Layaway programs may entice credit weary borrowers to purchase items that they otherwise would not have purchased this year.

Wal-Mart (WMT), the nation’s number one retailer, will continue to thrive. Discount retailers like Family Dollar (FDO), 99 Cents Store (NDN) and Dollar Tree (DLTR) will continue to profit as consumers downsize. Clothing retailers like TJ Maxx and Burlington Coat Factory have also implemented layaway programs that should help sales. I also expect that niche items will perform well. Small ticket electronic items such cell phones, video games and mp3 players(iPods) will continue to sell. I think that video game demand will remain high as parents shop for children this holiday season. I expect Apple (AAPL) and Gamestop (GME) to do well despite low expectations.

Disclosure: no positions

This article was written by

Mark Riddix profile picture
Mark is the founder and president of New Horizons Financial Management. New Horizons is an independent investment advisory firm that provides personalized consulting services in investment and asset management. Mark has a degree in finance and has worked in investment management for the past 15 years. Mark has written a personal finance column for Baltimore and Washington metropolitan newspapers. Mark writes a financial blog at Multiply My Money.

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