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Retailers Hoping that Santa Will Bail Them Out - In July

We’ve said it more or less nonstop for the past year: retail sales are in the toilet and have shown very little signs of recovery.  And in an economy that is 70% consumer spending, that is bad, bad news.

So, what have retailers done to spur sales?  They’ve really scraped the bottom of the barrel this time, launching the biggest “Christmas in July” promotion in memory.   Perhaps store props of Santa sitting in a beach chair are exactly what the American consumer needs to convince him to open his wallet again.  But let’s just say we doubt it.   When his son or daughter tugs on his shirt and asked for a $20 “Christmas” present, he might well oblige.  But he’s not going to spontaneously throw down $1,000 for a new mattress or flat screen TV.  Nor is he going to buy a car…or a house.  Or a jacuzzi.  Or any other large purchase that generally involves taking on more debt.    Retailers should probably save what dignity they have left and ditch the Santas wearing Hawaiian shirts.

Speaking of maintaining dignity, we had to laugh when we saw some of the government’s proposals for closing the budget deficit.  Writing for the Wall Street Journal, Jonathan Weisman reports that the Department of Justice will now save money by using both sides of the paper when making copies.  Other agencies have proposed e-mailing documents around the office rather than print and distribute by hand (what is this, 1998?).

Hey, we applaud the President making an effort to cut government waste.   This should have been done years ago.  But, as Weisman writes,  ”If the administration produces $100 million in savings every 98 days for the rest of Mr. Obama’s term, the savings will total $1.5 billion, or three days of interest on the federal debt.”

More efficient use of the government’s copy machines will not make any appreciable difference given the money currently being hemorrhaged.   How many copies do you have to save in order to equal one Medicare Part D?   Or one Obamacare?

Don’t bother doing the math…it’ll just depress you.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy