If you made a bet on the specialty retailers leading up to the first $600 taxpayer rebate stimulus package, you got hammered.
Talk about a government plan backfiring big time.
That $300 billion in checks that fell out of the sky from government helicopters back in the March to May timeframe didn't find its way to the malls at all.
Instead, people paid down credit card debt, and tuition, medical and other bills, leaving little for spending on non-essentials.
The result was a litany of store closings nationwide, with several old-line, brand-name retailers going out of business.
It's game over for names like Circuit City (OTC: CCTYQ), Cache (NASDAQ: CACH), Talbots (NYSE: TLB), J. Jill, Wickes Furniture, Levitz, Bombay, Linens 'n Things, Movie Gallery, Wilson Leather, KB Toys and The Sharper Image.
Traders that leveraged into darling names, like hedge fund idol Eddie Lampert's Sears Holdings Corp. (NASDAQ: SHLD), got smoked. Shares of SHLD were trading at $105 when the checks when out. Today the stock is around $40.
Even Costco (NASDAQ: COST) -- the obvious slam dunk, aside from Wal-Mart (NYSE: WMT) -- got slammed, falling from $75 to $45 following the so-called stimulus package.
Those who bought into the hot specialty teen names, like Urban Outfitters (NASDAQ: URBN), Abercrombie & Fitch (NYSE: AFN), Aeropostale (NYSE: ARO) and Under Armour (NYSE: UA), got crushed, losing between 50% and 80% of equity valuations.
How about Nike (NYSE: NKE) correcting from $70 to $50? And Nordstrom (NYSE: JWN) falling from $40 to a $14?
Are you kidding me?
But, most surprisingly, the retailers that cater to the recession-proof rich were not immune to the retail implosion -- not by any means.
Diamond dealer to the ultra-rich, Tiffany & Co. (NYSE: TIF), saw its shares decline by 50% this year. Saks (NYSE: SKS) shares fell from $20 to $4 and change. Coach (NYSE: COH) collapsed from $37 to $12 before finding a bid. Zale Corp. (NYSE: ZLC) was obliterated, sinking from $42 to $3.
The bottom line is that what looked to be one of the most obvious trades to come along turned out to be one of the biggest busted themes of 2008.
Maybe next time.
Bryan Perry is a contributor to OptionsZone.com.
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Reader Comments (Page 1 of 1)
12-22-2008 @ 2:19PM
BHarrisoon said...
"READ MY LIPS": The vast MAJORITY of the "discretionary disposable income" has simply DISAPPEARED . . . just think of it being "contributions" to the exorbitant salaries, bonuses, and "other compensations" for the CEOs, CFOs, and upper management.
The reality is that, via the pyramid and Ponzi schemes, too many people have lost substantial savings/investments, reuctions in their net worths due to real estate losses, and confronted with the possibility (or reality) of the loss of their jobs/income.
Our "captains" of our economy . . . the FIs and corporate CEOs . . .have "gamed" our economy to the point of bankrupting our national economy. it is that simple. These people have KNOWN for a long time what was occurring . . . they simply did not have the integrity to confront what was occurring.
The "concept" of people using the :"stimulaus payments" as descretionary money was totally floawed . . . especially when the price of gasoline was OVER $4.00 per gal . . . that alone absorbed the "stimulus money" amounts per familiy.
We, as a nation, are "down to the bone on the hard realities of the "economic facts of life".
We are now in new "uncharted waters" economically . . . . and politically.
1-10-2009 @ 3:00PM
Nick said...
Its not difficult to be #1 when your competition is as pathetic as companies such as Circuit City and Sears or the small regional guys.