Posts filed under “Retail”

Home Equity Loans Fall of the Cliff

Alan Abelson, in this morning’s Barron’s, quotes Macro-Maven’s Stephanie Pomboy on why the consumer is soon to be spent-out:

“Whatever those worthies were smoking, it must have smelled pretty good because the investment mood until this past week was happily, giddily upbeat. The sentiment readings were almost uniformly bullish. Those blue skies were virtually cloudless: The economy was headed for another solid gain and corporate profits would continue on their merry way. Oh, rising oil prices could be a nuisance, but oil really didn’t matter all that much any more. Retail sales weren’t exactly robust — but not to worry, the consumer would come through as usual. Etc., etc., etc.

The trouble with fantasies is that no matter how pleasurable while they last, they leave a distinctly bitter aftertaste when they go “poof.” And last week they went “poof.” The economy obviously has been slowing, as will be evident when we get the first reading on GDP. Inflation may take an occasional breather, but it’s very much alive and malign. And is there any sentient — or should we say sober — soul who can’t hear the air finally oozing out of the housing bubble?
But sorriest of all is that the greatest consumer buying binge ever is starting to fade. And the reason why can be discerned in that simple but eloquent chart on this page, courtesy of MacroMavens. And what it shows unequivocally is that home-equity loans, which have been one of the great springs of the growth in the consumer-driven economy — the source, as MacroMavens’ proprietor, Stephanie Pomboy, puts it, of the “marginal consumption buck” — are going south for the first time since the last recession in 2000.

The downturn in home-equity loans, she further notes, is part and parcel of the recent overall sharp retreat in consumer borrowing, which has suffered its first quarterly contraction since the recession of 1991. And credit, she notes, “has come to replace wages as the driver of consumption. Last year, the $375 billion gain in disposable income fell way short of the $500 billion increase in consumption.”

Yet Wall Street doesn’t seem to care, she observes. It’s a bit like the ground is gradually giving way under your feet but you’d just as soon not hear about it.”

Couldn’t agree more. We addressed the correlation between home prices and consumer spending at RM back on January 10; for those of you w/o subs, I just moved that post here.

Also, I am compelled to point out that the August 31, 2005 WSJ piece, Shopped Out? is starting to look pretty good. I took an inordinate amount of grief over that one.

In trying to guess what remotivates the consumer, all I can come up with are these 5:

• Surge in hiring
• Decrease in inflation
• Rise in real wages
• Drop in Gasoline prices
or lastly
• A cut in interest rates.

Barring any of those of 5 — or even better, some combination — I do not see how consumer spending moves appreciably higher any time soon…

Source:
Jihad Jiver
UP AND DOWN WALL STREET
ALAN ABELSON
Barron’s, MONDAY, JANUARY 23, 2006
http://online.barrons.com/article/SB113780094391852533.html

Category: Economy, Real Estate, Retail

The Big Mac Index

Category: Currency, Retail

Soft Spots Go Beyond Employment

Category: Earnings, Economy, Employment, Inflation, Real Estate, Retail

Apple now bigger than Dell

Category: Investing, Retail, Web/Tech

December Retail Not So Hot

Category: Retail

Consumer Spending and Housing Correlation

Category: Economy, Real Estate, Retail

More on Holiday 2005

Category: Retail

Good — Not Great — Holiday Shopping Season

Back on December 1, I mentioned that "Holiday sales increases can be in the 3 to 4% range." This modestly Bullish call was at the very low end of Wall Street projections.

The prime motivation for that range was the decreasing gasoline prices post Katrina, and the love affair with Plasma Screen TVs (that was the good news). Keeping the Bullishness modest was the negative real income for the middle class; on the other end, the increasing take home pay for the ultra wealthy supported the relative strength of the luxury retailer.

The WSJ reports that "overall, Retail Sales rose 3.2%." And, the big winners were the luxury stores. Its a pleasant surprise anytime projections like this end up that accurate.

I also wish to remind you (again) how the silly NRF projection of 22% was; Their absurdity was a statistical abomination (and they were chastised in this space for it)

Here’s the Journal’s summary:

Holiday shoppers spent big on a few products last month, but held out for last-minute deals, resulting in mixed performances from U.S. retailers. Cash registers rang at luxury retailers and teen specialty shops, but sales at Wal-Mart Stores Inc. disappointed.

Overall, sales at stores open at least a year, a measure known as same-store sales, rose 3.2% in December from a year earlier, according to an index of 66 chains compiled by the International Council of Shopping Centers. The trade group, based in New York, had expected same-stores sales growth between 3% and 3.5%. According to the tally, same-store sales at luxury stores grew 6.4%, while discounters ticked up just 2.6%.

"All combined it was good, not great," said Jeff Klinefelter, senior research analyst at Piper Jaffray. "When we finally got the last-minute rush, it was the higher-end consumer that followed through with spending."



Source:

Luxury Stores Were Holidays’ Stars
Overall Retail Sales Rose 3.2%, Slowed by Discounters; Holdout Shoppers Also Hurt
STEPHANIE KANG
THE WALL STREET JOURNAL,January 6, 2006; Page A2
http://online.wsj.com/article/SB113646296655138522.html

Mixed Stockings for Retailers
http://online.wsj.com/documents/retro-060105sales.html

See the WSJ’s retailer chart here:

Read More

Category: Retail

Wal-Mart’s Worst Xmas in Five Years

Category: Retail

Read it here first: The Death Of Bling?

Category: Media, Retail