A recent Time magazine cover story described it as, "The New Frugality." The "it" here is the change in behavior, attitudes and even values Americans are embracing as a byproduct of the "Great Recession." It's just a fact that most of us have in some way or another altered our spending habits to a more frugal lifestyle as a direct result of the worst economic downturn since the 1930s.
One company feeling the sting of the country's new frugality is high-end retailer Williams-Sonoma (NYSE: WSM). Today the company reported a Q1 loss of $18.7 million, or 18 cents a share, compared with a profit of $10.4 million, or 10 cents a share, a year earlier. A performance not uncommon for retail stocks these days.
The losses were actually smaller than the company had projected, but those previous projections included a slashed advertising budget, a cut in capital spending and lowered merchandise inventories. More importantly, the company said that revenue in the quarter ended May 3 fell 22% to $611.6 million. Yikes!
Of course, Wall Street rewarded the anemic results with a near-10% drop in Wednesday's trade. So, what does the Williams-Sonoma miss tell us?
Well, it tells me that despite the last few weeks of upbeat market sentiment, there are still a lot of bearish skeletons in the earnings closet. I think those skeletons will be spookiest throughout the high-end, discretionary income sector, and that means more pain for luxury retailers like Williams-Sonoma.
So what's an investor to do?
I think now is the time to concentrate on stocks that cater to the new frugality. Stocks like McDonald's (NYSE: MCD), Amazon.com (NASDAQ: AMZN) and even Google (NASDAQ: GOOG) all occupy a unique niche in this "frugal nation," as do these seven other frugal stocks.
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