Monday, December 17, 2007

Desperation for Retailers

Using everyone's favorite scapegoat - the weather - retailers are making a fresh round of excuses as to why nobody is in the malls this year.

NEW YORK (AP) -- Following a lukewarm shopping weekend, the nation's stores are now focusing their attention on the final week leading to Christmas, as consumers seem to be postponing more of their buying to the last minute compared to a year ago. Just as malls and stores ushered the official start of the holiday season with expanded hours and generous discounts, they plan to do the same in the final stretch. Macy's plans to pull all-nighters at several of its stores, including its Manhattan flagship, starting Friday. Toys "R" Us plans to keep its doors open until midnight every day until Dec. 24.

Based on early reports from analysts and malls on Sunday, sales results were generally unimpressive this past weekend, as shoppers were held back by a snow storm that spread a mix of sleet, freezing rain and snow from the Great Lakes states to New England. Consumers, fretting about economic worries, were also delaying their shopping even more this year, knowing there's a full weekend before Christmas, when the bargains will be even better.

Oh dear. If this isn't a sign of a desperate sector I don't know what it. Pulling all nighters, you have to be kidding me. Weather? Hmm you mean in December it's cold and snowy in New England and the Great Lakes region? Wow, that never happens. I grew up on the shores of a Great Lake and spent 3 winters in New England. Guess what? It was rainy, snowy, icy cold and just generally miserable every winter. People don't put their lives on hold because the weather is crappy.

Had it been a really warm December, the excuse would be, it was too warm and people weren't shopping because they were out having picnics in the park. Blaming the weather is the equivalent of my dog ate my homework. To me any time an industry blames weather for poor performance it is time to short that industry like nobody's business. I guess there are exceptions like a Katrina or those crazy Cali fires. But blaming snow in winter for poor sales is ridiculous.

And what is this delaying their purchases? What like the week before Christmas the fretting consumers will stop fretting? On the 23rd the worrying will stop. The credit cards will un-max themselves and gas prices will drop 80%.

Consumers are not spending because consumers have no money. They have no money because inflation is out of control and consumers are spending 5-10% more on food and utilities. This won't change on the 23rd. Consumers have no money because the HELOC ATM is closed. This won't change on the 23rd either. Retailers are toast.

RTH was around $99 last week. It is trading close to $92 today. And the really bad news hasn't even hit yet. I own several RTH puts.

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