I’m not sure about Christmas this year, Virginia.
Macy’s earnings report on Wednesday did not bode well for the retailers, as the famed department store cited worsening same store sales year over year and a glut of inventory.
Macy’s stock was hammered yesterday falling 14% on the earnings report and taking down the whole retail sector stocks in its wake.
The solution said CEO Terry Lungren is to move down the economic scale and open more Macy’s Backstage, a discount store to compete with TJ Maxx and Marshall’s.
It’s a pattern I have been hitting on the last 6 months. The US consumer is stretched and weary from this prolonged economic malaise. Their income has not grown, their expenses are rising and the prospects of things getting better seem dim in the medium term.
It’s necessities that are being purchased. Replacing a 10-year-old car at dirt cheap rates. That’s stretching the budget to the point were the retail discounters are doing better than middle market department stores.
While retail analysts are still projecting a modest rise of 2% in holiday shopping, which I believe will come in flat to slightly lower, much of those sales will be on discounted merchandise. The discounting will cut into margins further hamstringing retailers.
So Virginia, if you are looking at a miracle on 34th Street you may have to look at the south side of the street at all the discounters.