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Betting It All On Black (Friday)

I wrote an article for DTI discussing how consumers are transmitting their intentions loud and clear, we just don’t seem to be listening.  Every day the drum beat grows a little louder.  In some island language of drumbeats and rhythm consumers are telling us that they have entered a long, near-dormant stage of spending.  It was brought on by many things, including their age & stage of life (demographics), their personal balance sheets (debt) and their income (unemployment).  But we know all these things.  What seems odd is that investors and analysts seem to be ignoring these things and are hoping beyond hope for a Christmas season that surprises to the upside.  The Christmas shopping season starts in earnest the day after Thanksgiving, dubbed Black Friday.  In a sense, many in the investment community are betting it all on black.  I think they will be sorely disappointed.

That disappointment is being telegraphed by retailers as they try to get ahead of the game.  Among the strategies being employed are preemptive strikes (Walmart pricing items at $10 or less, and early price cuts on desired items like TV’s) and limited offers (thin inventory).  While these approaches might make the bottom line attractive as a percentage, they do nothing to help the top line grow.  Revenue growth is the deal.  And it’s not happening.  Saks and Target both reported year-over-year declines in sales for stores open more than a year.  That story is playing out across the retail sector.

The consumer is telling us something.  Expect less.