Bah, humbug! Holiday sales projected to drop 1% this year
It could be worse, of course.
On Monday October 5 the National Retail Federation projected that retail sales in the United States will fall 1% in the crucial November-December holiday shopping window. That will take total retail sales back to where they were in 2005.
According to the federation, whose membership represents 1.6 million retail locations, sales this season will fall to $437 billion from $441 billion in 2008 holiday shopping season. That’s a blast from the past: holiday sales were $433 billion in 2005.
You don’t have to search very hard to understand the reasons behind the drop. Read more
What’s next? Give away the computer? Well, sure. The profits are in the accessories
Give away the razor; make money on the razor blades. It’s a cherished business strategy popularized by companies such as Gillette.
But how about Give away the computer; make money on computer covers? Heard that one yet?
Well, it’s worked just fine at Wal-Mart (WMT) where a Compaq Presario model sells for $298. And now it’s spreading to Best BUY (BBY) and Staples (SPLS). Best Buy picked up two percentage points of market share from February through April thanks to aggressive sales in an expanded electronics section focusing on laptops and netbooks. Staples has increased its selection of computers in those two market segments by 50%.
When I was a kid growing up in New Jersey, I swear that a local retailer ran adds saying “We lose money on every sale and make it up on volume.” Now that can’t possibly work, can it? Aren’t computer retailers cutting their own margins–and throats?
No way.
In fact, these companies are actually late comers to a major economic trend. Read more
Update Coach (COH)
Coach (COH) reported that its earnings for the June quarter matched Wall Street expectations at 43 cents a share.
That’s about the last good news for the fourth fiscal quarter that Coach had to announce, however. Coach certainly hasn’t escaped the collapse in retail sales–although it is weathering the downturn better than most.
For investors who can get past the bad news of this quarter, though, the stock remains a compelling way to profit from the increasing number of middle-class consumers in China. That’s why I put the stock in my book, The Jubak Picks, and why it stays in that portfolio. Read more
