The big retail chains are generally seen as pretty good barometers of the
health of "the consumer." And since -- in today's late-cycle debt-binge pseudo-capitalism
-- the consumer drives the economy, the numbers coming out of the aforementioned
retail chains should be cause for worry.
First Macy's got our attention:
Macy's
Sounds a Holiday Alarm, and Retailers Brace for Heavy Discounting
(New York Times) - When Macy's, a store closely associated with Christmas,
says there is trouble brewing ahead of the holidays, it is enough to send
the world of shopping into a tailspin.
The retailer of "Miracle on 34th Street" warned Wednesday that its stores
were awash with merchandise after a sluggish fall season and that slow business
would force it to go all-out on discounts during the holidays.
Macy's shares plunged about 14 percent, dragging other retailers down, too.
The Hudson's Bay Company, which owns Saks Fifth Avenue and Lord & Taylor,
fell 5 percent, as did Kohl's. Burlington Stores fell about 7 percent.
Then Nordstrom dropped a bomb:
Nordstrom
Shares Plunge After Profit Misses Analysts' Estimates
(Bloomberg) - Nordstrom Inc. fell as much as 18 percent in late trading
after missing third-quarter earnings estimates and cutting its annual forecast,
renewing concerns about a slump in the department-store industry.
Profit amounted to 42 cents in the period ended Oct. 31, Nordstrom said
in a statement Thursday. Excluding some items, the earnings came to 57 cents.
Analysts had projected 72 cents on average, according to data compiled by
Bloomberg.
Nordstrom follows Macy's Inc. in reporting disappointing results, underscoring
a broader slowdown for department stores. Consumers are spending less of
their money on apparel and accessories, shifting their budgets to cars, homes
and technology. Retailers and clothing suppliers also have struggled to pare
down excess inventories, forcing them to rely more on discounts.
The results reflected "softer sales trends that were generally consistent
across channels and merchandise categories," the Seattle-based company said
in the statement.
The shares tumbled as much as $11.68 to $51.79 in late trading in New York.
Nordstrom already had slid 20 percent this year through the close of regular
trading Thursday.
Nordstrom's same-store sales, a closely watched benchmark, grew just 0.9
percent last quarter. Analysts had estimated 3.6 percent, according to Consensus
Metrix. The Rack outlet business, a former bright spot for the business,
also suffered in the period. Same-store sales fell 2.2 percent, missing a
projection for growth of 2.8 percent.
What does this mean?
First, e-commerce is winning big. Amazon, eBay, et al, have eaten the big-box
stores for lunch, and they're still hungry. Unless Telsa puts
a car showroom in every mall in America, most malls are toast -- and mall REITS
are great short sale candidates.
Second, the surge in sub-prime auto loans wasn't such a good thing after all,
since those car mortgage payments apparently leave less disposable income for
whatever it is people buy at Macy's and Nordstrom.
Third, the overall economy is, as analysts in the sound money community keep
saying, way weaker than the headline government numbers imply. The jobs being
created obviously don't pay enough to enable workers to buy new clothes --
even though as a waiter/bartender you do have to look sharp.
Last but not least, stock prices are more vulnerable than you might think
from watching CNBC. US equities fell hard today, and though there were several
explanations being tossed around (China's slowdown, a Fed rate increase), the
implications of a "profit recession" should be in the mix. Because really,
has there ever been a bull market when corporate earnings were falling?
