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In case you haven't noticed lately, times are tough for the American economy, and this volatility is more than likely going to carry over into the upcoming holiday shopping season, according to the Wall Street Journal (subscription required).In an article today, the WSJ discusses the probability of a grim shopping season, reporting that economists are predicting that retailers are likely to see their lowest sales volumes for the past 17 years. These dark forecasts come from both research and consulting firms Deloitte LLP and TNS Retail Forward Inc., but the scary part is that these predictions were made before the most recent economic troubles, and the harsh reality of what lies ahead for retailers could prove to be even worse than these current predictions.
Let's take a second look at the major factors that are going to contribute to a weak holiday shopping season (granted the list could be made much longer, but let's just highlight the main factors for now):
- High fuel prices, which have fallen over the past month but are still running at historically high levels
- Higher unemployment
- Rising food prices
- Tough housing market
- The credit crunch
Also joining the list of grinchy forecasters for the upcoming season is the National Retail Federation (NRF). The industry group has not gone so far as to predict the worst sales levels in the past 17 years, but it is not exactly ruling out the possibility either.
According to one vice president of the NRF, Scott Krugman, this upcoming shopping season will be "as challenging as any in recent memory." Just solely based on what I have seen over the past couple months with the economy I would have to agree with Krugman on this -- it is definitely going to be a rocky season.
What can we take from these predictions? If you believe that we are in store for the worst year since the early 90's then perhaps we can learn some lessons by looking back in time a bit. During the early 90's when the nation was dealing with a recession, discount stores did just fine. Wal-Mart (NYSE: WMT) had no trouble taking advantage of the situation, while the more pricey big named department stores such as Macy's (NYSE: M) struggled to keep up.
If the economists are right about this season, and I don't see any reason to doubt them at this time, then for your portfolio you may take a lesson from the past and start to take a closer look at the discount stores, and avoid big name department stores and luxury retailers.
How do you see your upcoming shopping season shaping up? Are you expecting to cut back on your normal shopping habits, or will it be business as usual this year in your house for the holidays?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
7-20-2009 @ 10:05PM
Ebony said...
Anybody who was anybody knows that this recession is not going to last through "next year" this will be a 1970s recession. We prepare foods once a week like chili everyday or turkey soup everyday. That way theres always something to eat off of. Going out will be a thing of the past, people will need to work longer hours for less pay. It will get worse than it already is now, jesus is coming soon whether democrat or republican get into the white house.