Retailers, consumers and prices
Check out the winter wonderland.
As in, “I wonder if people are going to fight through the snow, sleet and rain this weekend to come to my store?”
A major storm headed for the Northeast could make things dicey for retailers on the last Saturday before Christmas, typically one of the biggest two shopping days of the year.
Retailers are hoping for a strong weekend to help lift what many analysts expect to be the worst holiday shopping season in about two decades.
But having just walked to work in Chicago, I can tell you that, depending on how this wintry mess hits the Northeast, consumers might have second thoughts about leaving their homes for the mall.
Planalytics, which measures the effect of weather on retailers, says the Northeast, lower Midwest and Great Lakes regions could see snow, sleet or freezing rain. On the West Coast, recent rainy conditions could continue to disrupt holiday traffic.
Along with steep discounts and extended hours, maybe retailer’s could offer door-to-door transportation.
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Check out how the rich aren’t all that different from the rest of us after all.
They aren’t spending any money either — at least that’s how it looks according to the earnings for upscale department store Neiman Marcus.
Revenue fell 13 percent to $986 million in the first quarter, which ended Nov. 1.
Operating profit, excluding one-time items, fell almost 50 percent.
The results are not necessarily a surprise. Unlike other recent economic slowdowns, luxury retailers have been hit this time around, too.
But the earnings do serve as a reminder that this recession is a falling tide that grounds all boats.
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Office Depot closing stores, distribution centers
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Wal-Mart has been the big retail winner in the recession and new data suggests that it could keep some of its gains after the economy recovers.
According to a survey by America’s Research Group, 9.3 percent of consumers surveyed said they had shopped at Wal-Mart for the first time this year.
Of those, a whopping 98.9 percent said that they would shop there again and the same number said they would continue to shop there once the recession ends.
“We’re watching the total domination for this retailer called Wal-Mart,” America’s Research founder and CEO Britt Beemer said.
The results were from a series of questions America’s Research asked on behalf of Reuters during the group’s weekly holiday shopping survey.
Black Friday has come and gone but what on earth happened at the cash registers over the Thanksgiving weekend? The data is trickling in, and so are the early critiques. (See our previous blogs: Treat Black Friday reports cautiously and Black Friday data spurs more questions than answers)
Here is a break down of the latest reports and what data is still to come:
According its 2008 Black Friday Weekend survey, conducted by BIGresearch and published on Sunday, the NRF said more than 172 million shoppers visited stores and websites over Black Friday weekend (which includes Thursday, Friday, Saturday and projections for Sunday), up from 147 million shoppers last year.
Check out some cautionary comments about how much weight to put on Black Friday sales reports.
The comments come from the Goldman Sachs U.S. economic research group and repeat caution the firm has given in the past about the much-hyped kickoff to the holiday shopping season.
1. “Shoppers are not sales.” Essentially, Goldman Sachs notes that just because people are in stores, it doesn’t mean they are buying something.
“Over the years, Black Friday has become a cultural event; people go not just to shop but to be a part of the broader experience, which could cause an increase in traffic that bears little relation to consumer spending,” the Goldman team wrote.
2. “Sales are not profits.” Retailers were offering deep discounts to get consumers into stores on Black Friday, discounts that could hurt profits.
3. “One day is not the holiday season.” The team notes that the correlation between data on Black Friday and the entire holiday season has been historically poor.
Thanksgiving also came late this year, so there are fewer shopping days between then and Christmas.
“Simply put, with less shopping days each one has to be better for the overall holiday shopping season to be strong,” the Goldman Sachs team wrote.
Want to keep track of the holiday season as it unfolds for retailers? Check out the Reuters Holiday Shopping page here.
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Call it a test of the American consumer’s mettle.
How many will feel confident enough about the economy, and their own future within it, to spend money that is increasingly hard to come by? How many will resist the siren call of steep discounts and sales for even the hottest gadgets, like those available at Apple Inc’s stores?
This Black Friday, such questions are not only central to the future of many of the best known U.S. retailers, but amount to a key indicator of how quickly the country’s consumer-led economy will shrink in the coming months. How deep a recession could it be, how long might it last?
U.S. retailers, some of them on the brink of complete ruin, are already slashing prices ahead of Black Friday next week. We’ll be covering the fallout of the financial crisis and how it is changing the consumer psyche in great detail, both here and on the Reuters Holiday Shopping coverage page. To start off, here are a few images of how “recession” is the new sexy when it comes to luring shoppers, from our reporters in the trenches.
New York City, where the sign says it all, via Nick Zieminski:
It almost looks like the Entire Store is for Free, though that is not the case:
These are from Atlantic City, if anyone is looking for diamonds, via Martinne Geller:
Check out the mixed messages from Home Depot.
The retailer posted better-than-expected quarterly profit. But that was still a 31-percent drop.
The company also said it expected sales to drop more this year than it previously thought.
Home improvement retailers were the leading edge of the retail slump, getting hit by the housing slowdown before the rest of the economy fell into what is likely a recession.
But with rival Lowe’s and now Home Depot both beating expectations, there could be signs of of a turnaround.
“Hardline retail stocks have historically begun their recoveries when expectations begin to be achieved, and this may be happening for Home Depot and Lowe’s,” Credit Suisse analyst Gary Balter said in a research note.
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Check out retailers changing their return policies.
More than half the retailers surveyed by the National Retail Federation say their return policies will be more lenient during the holidays than the rest of the year.
Also, 11 percent of retailers said their return policies would be looser than last season.
In recent years, some retailers have made it harder to return items in order to combat fraud.
But with the Untied States in what many economists say is a recession, retailers are seeing an increase in returns as a percent of sales and are trying to be practical in their policies.
“Retailers seem to be finding a balance between providing good customer service to shoppers while preventing criminals from taking advantage of lenient policies,” said Joe LaRocca, NRF Vice President of Loss Prevention.
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The return of the interview suit (N.Y. Times)
Check out sales falling again in the latest week.
The International Council of Shopping Centers-Goldman Sachs chain store sales index showed a 1 percent drop in the week ended Saturday, the worst week since April 5. Year-over-year, the index increased four percent.
But the ICSC did point out some positive factors for retailers: traffic improved at discounters, department stores, wholesale clubs and even apparel retailers.
Perhaps consumers can afford to drive to those stores again.
According to the U.S. Energy Information Administration, the average retail price of a gallon of regular-grade gasoline in the United States fell for the eighth consecutive week to $2.22 on November 10. That’s a $1.61 per gallon drop since September 15, ICSC noted.
Even the rising unemployment figures could be interpreted in a positive light.
A J.P. Morgan research report notes that in the past five recessions, unemployment increased by about 2.5 percentage points from the low to the high, while retail stocks bottomed about halfway through.
“Although we’re not ready to call a bottom, we’d note that unemployment has increased (1.7 percentage points) from its recent sustained trough in February 2008, more than the historical halfway mark of past recessions,” analyst Charles Grom wrote.
The unemployment rate was 6.5 percent in October and J.P. Morgan economists see it peaking at 8 percent in the second quarter of 2009, so by that estimate, the rise in unemployment is more than halfway done.
Not in time for Christmas, but is there a light at the end of the tunnel in 2009?
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