Best of the Week
Most Popular
1.Gold And Silver Voodoo Analysis Price Forecasts - Austin_Galt
2.UK Saved From I.S. Threat But Scottish Independence Nightmare is Not Over! - Nadeem_Walayat
3.Silver Price At or Very Close to an Important Low - Clive_Maund
4.Gold And Silver - PetroDollar On Its Deathbed? PMs About To Rally? No - Michael_Noonan
5.Gold and Silver Bear Phase III Dead Ahead - Rambus_Chartology
6.Stock Market Major Selloff Looms - Zeal_LLC
7.Inflate or Die! When Leverage Fails and Market Hope Turns to Fear - Ty_Andros
8.Gold Price Very Close to an Important Low - Clive_Maund
9.Market Forecasts for Stocks, Gold, Silver, Commodities, Financials and Currencies - EWI
10.U.S. Aggression - Will Russia and China Hold Their Fire? - Paul_Craig_Roberts
Last 5 days
Europe Is Crumbling Into Economic Collapse - 2nd Oct 14 - Raul_I_Meijer
Gold Stocks Stealth Rally - 2nd Oct 14 - Gary_Tanashian
U.S. 30 Year US T-Bonds Voodoo Analysis - 2nd Oct 14 - Austin_Galt
Top Approaching in Berkshire Hathaway Stock? - 2nd Oct 14 - EWI
Stocks Interesting, Junk Bonds at Fair Value, Bill Gross Who Cares? - 2nd Oct 14 - David Tepper
Gold Will Surprise In More Ways Than One - 2nd Oct 14 - Bob Loukas
“Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings? - 1st Oct 14
Dow Stocks Index And The No Mercy Cycle - 1st Oct 14
Why China Thinks Gold is the Buy of the Century - 1st Oct 14
Forex Volatility Predicts Bottom in Gold and Silver? - 1st Oct 14
Stock Market Wil-e-Coyote Moment May Have Arrived - 1st Oct 14
Europe Teetering the Ddge of a "Japan-style" Deflation - 30th Sept 14
Economists Economic Atonement - 30th Sept 14
Everything You Need to Know About the Stock Market S&P Index Until Christmas - 30th Sept 14
Singapore Becoming Global Gold Hub - Launches Kilo Bar Contract And Gold ATMs - 30th Sept 14
Germany Fights on Two Fronts to Preserve the Eurozone - 30th Sept 14
Turn the Tables on the Gold and Silver Market Manipulators - 30th Sept 14
U.S. 2014 Election Business as Usual - 30th Sept 14
Gold - Time to Buy the Dip? - 30th Sept 14
Urging Investors to Stay Liquid for the Coming Gold Stocks Boom - 30th Sept 14
The Japanese Deflation Myth and the Yen’s Slump - 29th Sept 14
Epic Investor Optimism that Can Be Reversed Only by a Huge Stocks Bear Market - 29th Sept 14
Russia’s Gokhran Buying Gold Bullion In 2014 and Will Buy Palladium In 2015 - 29th Sept 14
The End of Monetary Policy - 29th Sept 14
Here's What Rising Interest Rates Really Do to Your Shares - 29th Sept 14
Is a Credible Stock Market Top Forming? - 29th Sept 14
Silver Price At or Very Close to an Important Low - 29th Sept 14
Gold Price Very Close to an Important Low - 29th Sept 14
Nihilism And The Unknown Future - 29th Sept 14
Stock Market S&P, NAS Change In Trend? None Apparent, But A Caveat - 29th Sept 14
UK Saved From I.S. Threat But Scottish Independence Nightmare is Not Over! - 29th Sept 14
U.S. Aggression - Will Russia and China Hold Their Fire? - 28th Sept 14
Currency Wars and the Death of the Euro - Audio - 28th Sept 14
Obscure Maritime Law Practically “Guarantees” Profits for These Energy Companies - 28th Sept 14
Stock Market Primary IV Underway? - 27th Sept 14
Darwin And The Climate Apocalypse - 27th Sept 14
The Global Middle Class and Copper Consumption, A Stop Spike Event - 27th Sept 14
Can Money Save The Climate? - 27th Sept 14
Gold And Silver - PetroDollar On Its Deathbed? PMs About To Rally? No - 27th Sept 14
Debt and Inflation Consquences of American Fear - 27th Sept 14
U.S. and Global Confidence are in Divergence - So Are Stock Markets - 27th Sept 14
Are U.S. Cars About to Crash? - 27th Sept 14
Why the U.S. Created and Armed ISIS From Libya to Syria - 27th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Most Exciting Event in the History of Technical Analysis

Weakest Holiday Retail Sales Growth Since 2008 Means Time to Short Retailers

Companies / Sector Analysis Dec 28, 2012 - 04:27 AM GMT

By: Money_Morning

Companies

Keith Fitz-Gerald writes: Initial U.S. retail sales figures released on Wednesday showed sales growth for the holiday season was the worst since 2008.

According to MasterCard SpendingPulse, holiday sales posted a paltry 0.7% increase against expectations of a 3-4% gain. That's below the same period last year when sales grew at a 2 % pace.


Analysts looking for a convenient excuse have been quick to blame Hurricane Sandy. But in reality, there's something else much bigger at work here.

That's why I'm actively hunting for shorts in the retail sector right now and will be for much of the first quarter next year.

Following the holiday data and some moderate earnings that incorporate the extra week this quarter, I simply don't think hard- core retail companies like the The Gap (NYSE: GPS), American Eagle Outfitters (NYSE: AEO), The TJX Companies ( NYSE: TJX), and Abercrombie and Fitch Co. (NYSE: ANF) -- which are up 71.3%, 47.41%, 32.2% and 50.67% respectively year to date through Christmas Eve ---will be able to sustain these big up moves.

In fact, there are several real reasons why I think holiday sales were down and consumer spending will continue to drop into 2013, making select retailers good short candidates:

1) People simply have less money in their pockets and economic uncertainty is keeping it there.

The undeniable casualty in this entire mess is consumer confidence. Never mind the "recovery" or the fiscal cliff, the data clearly shows the average American is girding for four more years of economic insecurity.

For example, current consumer confidence figures reflect lows we haven't seen since last June so it's only natural that consumer spending falls as well.

Unfortunately, this is not a situation limited to the United States. As I noted in a recent Fox Business appearance, I see this trend in other countries where wary consumers are also trying to hang on to what they have.

The other key take away here is that inflation is working its way through the system. I know the government says it doesn't exist, or, my personal favorite - is "under control" -- but who are they kidding? The thousands of investors I've spoken with over the past 12 months tell me they're getting pinched on all sides.

I guess if you live in Washington and work for the government, you can ignore the official statistics, but out in the real world where people have to pay for everything from food to medicine to fuel and much more, it's a very different picture.

The cost of everything from health care to the food we eat is going up by 10%, 15% or even 20% a year. Here in Oregon, for example, my breakfast costs 60% more than it did a few years ago and my son's tuition has shot up. Our health care premiums have also risen by double digits.

And I know what we're experiencing is not an isolated situation - the dollar quite literally doesn't go as far as it used to.

2) Numb consumers are shifting to non-traditional sales outlets in an attempt to make each dollar they do spend go farther; this is skewing the data.

The SpendingPulse data is supposedly all inclusive and covers retailers in key categories like electronics, jewelry, furniture, and other holiday- related segments. According to MasterCard it's also representative of various forms of purchasing, because it includes cash, checks and, of course, credit card purchases.

I am not so sure this data set is what it's cracked up to be.

I've noticed a shift in purchasing patterns that reflects consumers patronizing non-traditional outlets like craft stores, farmer's markets, and online versions of non-traditional retailers like Etsy.com, which bills itself as the world's most vibrant handmade marketplace.

Even if many of these outlets are included in the SpendingPulse data, they end up being dropped because they don't meet the "same store" criteria - meaning that statisticians may not include them because the data being measured must come from stores open at least a year in an effort to smooth volatility.

There's also the rise in coupon redemption and the shift to value retailers to consider. It's no longer essential to have the absolute latest and greatest when it comes to shopping.

Consumers, for example, may conclude that an older- generation iPad is just as good as a brand new one. So, that likely drops the aggregate value of purchases, because last year's models may be clearance priced or simply not worth as much as the top of the line.

And that speaks to something else at work. Many value- conscious consumers are increasingly content to shop at club stores or at retailers with broadly defined product sets that cross historically significant boundaries. Examples include grocery stores that now integrate consumer staples, or department stores like Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) that now include food items.

And finally...

3) Retailers are, at least in part, to blame.

By stretching the holiday shopping season forward with displays that effectively bookend the holiday buying season and extend well beyond the two months that are traditionally measured, they are ensuring a holiday spending "slump," for lack of a better term, because the spending is less concentrated.

This year, for instance, I saw a good deal many more Christmas displays going up before Halloween than I've noticed in past years. Now, I'm seeing considerably more discounting online and in the local stores for post-holiday sales than I can recall in years.

It's entirely possible under the circumstances that consumers may simply be shopping earlier or waiting until after the holidays to catch the real bargains. Depending on how much consumers purchase and when they buy, this could just skew the numbers or remove them from the accounting period al together.

Personally speaking though, I see a backlash building.

Holidays have become overly commercialized "events" that are literally nothing more than an excuse to spend money. Many consumers have not only lost the "spirit" but have turned downright negative towards it all.

Under the circumstances, I can easily envision a return to basics building in the next few years that dramatically reduces retail spending overall, and on a level far more dramatic than most retailers can envision today.

Looking forward, there are clearly going to be ramifications for all of this, and I think the preliminary holiday data is going to work its way through the entire consumer purchasing experience in 2013 on several levels.

Hurt by slower sales this season, retailers are likely going to slow down their ordering. That's going to reverberate all the way through the purchasing chain. Retailers will be less likely to warehouse materials so the supply chain will be tightened further.

This translates into lower restocking levels and slowing shipment volumes, particularly if next year's consumer data remains dodgy. It also suggests a corresponding drop in wholesale purchasing activity.

Meanwhile, manufacturers are likely to cut back on production, materials purchases and - you guessed it - labor as a means of compensating. That, in turn, pushes back into raw materials and sub-assembly.

Obviously one data point does not make a trend, but the latest SpendingPulse data calls into question the very notion of a recovery in my mind.

Perhaps I'm just in a curmudgeon-like mood this morning, but I simply cannot see shell-shocked consumers who have endured the fiscal hell of the financial crisis suddenly opening up their wallets and returning to spending levels associated with the "good-old days" no matter what hare brained stimulus schemes Washington comes up with next.

If anything, I think they'll cut back even further.

Source :http://moneymorning.com/2012/12/28/the-wea...

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 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

Free Report - Financial Markets 2014