Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
Stock Market More Correction Likely - 25th Sept 16
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16
Gold vs. Stocks and Commodities, Pre-FOMC - 20th Sept 16
BrExit UK Inflation CPI, RPI Forecast 2016, 2017 - 20th Sept 16
European banks may be more important than the Fed this week - 20th Sept 16
Gold, Silver, Stocks and Bonds Grand Ascension or Great Collapse? - 20th Sept 16
Mass Psychology in Action; Instead of Selling Gilead it is Time to Take a Closer Look - 20th Sept 16
Hillary - Finally Well Deserved Recognition for Deplorables - 20th Sept 16
Fascist Business Model: Reich Economics - 19th Sept 16
Multiweek Correction in Gold and Silver Markets Continues - 19th Sept 16
Stock Market May Turn Ugly This Week - 19th Sept 16
China Is Digging Itself into a Deeper Hole - 19th Sept 16
Yellen’s Footnote 8 Would Put Interest Rates on Autopilot - 19th Sept 16
Central Bank Digital Currencies: A Revolution in Banking? - 19th Sept 16
UK Government Surrenders to China / France to Build Nuclear Fukushima Plant At Hinkley Point C - 19th Sept 16
Stock Market Correction Already Over? - 18th Sept 16
American Economics - 18th Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

U.S. Retailers Canary in the Coal Mine

Companies / Sector Analysis Dec 14, 2010 - 12:52 PM GMT

By: James_Quinn

Companies

Best Financial Markets Analysis ArticleSome people have contested my statement that there are thousands more retail stores in the US today than there were in 2007. Yes, many mom and pop stores have gone out of business, but the big boys continued to expand in the face of reality. The mall based mega-retailers dominate the retail landscape in this country. Here is a partial list of the biggest retailers in the US and their store counts.


Just these nine well known retailers alone, have added 6,435 stores since 2007. Some of the stores were international, but the vast majority were opened in the U.S. This increase in store counts in the face of reality is the ultimate in CEO hubris. Inflation adjusted retail sales since 2007 in the U.S. are down 19%. This is a recipe for disaster. Americans must deleverage over the next decade. They have no choice. Their retirement savings levels are pitiful. They will be forced to stop buying crap. The boomers are leaving their high spending years and entering the forced saving phase of their lives, whether they like it or not. Every retail CEO in the country should recognize these facts. But still, they relentlessly expand. A fool and his company are soon parted.

The lifeblood of retail expansion is same store sales. If same store sales do not increase, any store count expansion becomes a death march. Below is a chart of the same store sales increases/(decreases) for November of each of the years listed for six of the largest well known retailers in America. With a base year of 2006, I've shown what the sales level for comparable stores is today versus 2006. This includes the outstanding growth year of 2007, before the financial crisis. Even a CNBC anchor should be able to realize that the "Best" retailers in America have lower sales today than they did in 2006.

Now for the kicker. Inflation since 2006 according to the BLS has been 10%. Therefore, on an inflation adjusted basis, sales for these retailers since 2006 are down by 7% to 17%.

Today, Best Buy reported atrocious 3rd quarter sales figures. Best Buy is rightly considered one of the best run retailers in America. The Apple iPad is a mass sensation. Consumers are supposedly spending again. The age of austerity is over according to the mainstream media. Best Buy's biggest competitor, Circuit City, went out of business two years ago. The world was its oyster. But somehow, the yellow brick road turned from gold to piss.

In the U.S., Best Buy’s same-store sales dropped 5%, while total sales fell 3% to $8.7 billion. The company estimated that its market share declined 1.1 percentage points, losing traction in TVs and gaming software, and it also expects its share for the year to decline. By categories, U.S. sales of consumer electronics, which make up more than a third of Best Buy’s total domestic business, fell 11%, while entertainment software sales, which make up 15% of the total, slid 14%.

 

It seems that the storyline being sold to the American public by the media is a load of bull. Best Buy is the first of many retailers to be blindsided by reality. Americans are running out of money. They've used up all the equity in their houses. The credit cards are maxed out. Wages are stagnant. Retirement years in a brown cardboard box awaits delusional Boomers unless they stop spending and start saving.

Best Buy's results are the canary in the coal mine. Delusional retail CEO emperors across America need someone to step forward and tell them they have no clothes. Continued expansion in this environment will lead to financial ruin, massive layoffs and bankruptcies.

Based upon history and the known hubris of most CEOs, there will ultimately be thousands of vacant rotting rat infested big box eyesores dotting the landscape over the next ten years. Maybe they can be converted to shelters for homeless delusional Boomers who forgot to save for their retirement. Ask the former CEOs of Montgomery Ward, Circuit City or Blockbuster if it can't happen.

Join me at www.TheBurningPlatform.com to discuss truth and the future of our country.

By James Quinn

quinnadvisors@comcast.net

James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 22-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and is writing these articles because he cares about their future. He earned a BS in accounting from Drexel University and an MBA from Villanova University. He is a certified public accountant and a certified cash manager.

These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer, and are not sponsored or endorsed by his employer.

© 2010 Copyright James Quinn - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

James Quinn Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife