As I've posted, Tuesday's voting results repudiate the idea that government of the rich for the rich will benefit everyone. Thursday's retail sales reports indicate that this concept fails just as badly when the economy is doing "well" as when it collapses.

How so? Despite Sarah Palin's $150,000 plus shopping spree, the ultimate luxury store Neiman Marcus saw its sales drop 28% in October compared with the same month last year. What is happening is that trickle down economics, which never worked when the government reported economic growth -- thanks to declining median incomes and rising costs --, is now failing even more catastrophically during the collapse. Simply put, the rich are getting poorer and the middle class are barely able to keep a roof over their heads.

Not surprisingly, this is working out well for Wal-Mart Stores (NYSE: WMT) whose sales are rising as more and more as people who aspired to shop at Neiman Marcus take advantage of Wal-Mart's low prices. How disappointed Wal-Mart must be with the election result; it encouraged its managers and employees to oppose Obama. And despite that misguided effort, Wal-Mart is now benefiting handily from the economic collapse.

Continue reading Retail sales plunge puts a new twist on trickle down economics

Retail sales plunge puts a new twist on trickle down economics originally appeared on BloggingStocks on Fri, 07 Nov 2008 10:35:00 EST. Please see our terms for use of feeds.

For anybody who's been following the downfall of Sharper Image, there seems to be a pretty obvious lesson: when people are worrying about the rising cost of food and are scrimping to fill their gas tanks, high-priced doodads and assorted electronic gewgaws are the first things to go. The next things, of course, are luxury goods.

Saks Fifth Avenue (NYSE: SKS)and Neiman-Marcus, two of the bigger high-end retailers, reported massive quarterly profit gains in the end of 2007, but are now acknowledging that their gains have reduced considerably in 2008. Obviously, part of this is the standard post-Christmas drop, but there has also been a significant slowdown in year-to-year growth. In 2008, Saks is anticipating a minor increase over 2007's sales, but a slight decrease in gross margin.

Part of this is due to a reduction in expenditures by "aspirational shoppers," or people who can't really afford super-luxe items, but occasionally buy them anyway. What's particularly interesting, though, is that super-rich customers are also cutting back on their purchases, a trend that some analysts attribute to a contagious feeling of economic worry. In other words, the overall belief that the economy is approaching a recession is reducing spending even among people for whom the economic slowdown isn't a pressing concern. In light of this trend, Saks' stock price has dropped from almost $21 in the beginning of the year to under $13.

In this context, it looks like the next year will be tough for manufacturers and importers of high-end luxury items. After all, if the people who can actually pay top dollar are cutting back, what will happen to the people for whom luxuries are a splurge?

In a recession, luxuries are the first to go originally appeared on BloggingStocks on Fri, 07 Mar 2008 16:15:00 EST. Please see our terms for use of feeds.

True Religion: Who says $300 jeans aren't selling? originally appeared on BloggingStocks on Wed, 08 Aug 2007 00:37:00 EST. Please see our terms for use of feeds.

Barneys New York sale coming soon? originally appeared on BloggingStocks on Fri, 22 Jun 2007 12:05:00 EST. Please see our terms for use of feeds.

Private equity to take Neiman Marcus public? originally appeared on BloggingStocks on Wed, 18 Apr 2007 12:48:00 EST. Please see our terms for use of feeds.