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Black Friday Bust Ahead?

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November 24, 2009 – Comments (12) | RELATED TICKERS: BGPIQ.DL

I wrote about some of the signs and signals about Black Friday (and the holiday season) for Fool.com yesterday. I can't imagine it's going to be so great, given some of the rumblings; at any rate, there's a nifty poll at the end of the article. (I also just saw Borders reported one of its typically disappointing quarters, but haven't dug too deep on that one although I did wonder about Borders' future recently, it still doesn't look too good as far as I'm concerned.) Any thoughts on Black Friday, the holiday season, and retail?

12 Comments – Post Your Own

#1) On November 24, 2009 at 1:12 PM, davejh23 (< 20) wrote:

I've read that retailers are operating with extremely low inventory levels, but I didn't really notice it in my holiday shopping until recently.  I try to get all my shopping done before Thanksgiving, and I've already run into inventory shortages at multiple retailers for multiple items that I've been looking for.  Inventories levels are typically low for exceptional Black Friday deals, and retailers hope that if you come out and don't get the deal you were chasing that maybe you'll stick around and buy something else.  Many are chasing deals this season, and I don't think they're going to settle for the lesser deal.  Even if the demand is higher than expected for Black Friday deals, I wouldn't be suprised if sales disappoint.  I'm definitely seeing people out shopping, but empty shelves aren't going to get the job done.

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#2) On November 24, 2009 at 1:42 PM, lemoneater (78.93) wrote:

davejh23, you mean to tell me that empty shelves are a way to mess with my mind? Just for Thanksgiving shopping I had to go to four grocery stores to try to find what I needed. I never did find a disposable roasting pan with handles! Super Walmart--my first stop let me down.

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#3) On November 24, 2009 at 1:54 PM, IBDvalueinvestin (99.68) wrote:

Lomax you will be pleasantly surprised with sales this Black Friday. Unless of course your shorting retailers then it won't be so pleasant.

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#4) On November 24, 2009 at 2:17 PM, TMFLomax (40.58) wrote:

davejh23 and lemoneater

Good point, retailers are probably super paranoid about inventory they can't move but you're right, at some point people can't buy what they can't find and that could be a huge misstep. (lemoneater, the fact that you couldn't find a disposable roasting pan with handles before Thanksgiving blows MY mind. Goodness. Seems they should have had plenty of those available.)

IBDvalueinvestin

Wow, you're in the better than expected camp, eh? I'm more bearish (and feel like weaker retailers may get creamed in this holiday season, but I do like some stronger retailers -- but no, I'm not short any -- I have used the CAPS red thumb with wild abandon though, which hasn't gone too well with, say, CHS, ha). Do you think it'll float all the retail boats or just the highest quality retailers?

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#5) On November 24, 2009 at 2:39 PM, russiangambit (29.27) wrote:

One retailer I noticed that never has anything in stock is GAP/Old Navy othe than some fully priced (over-priced junk that nobody wants) . I used to buy things for kids there and jeans, I don't bother with them anymore. I can't say I noticed the same drastic levels of invenotry controls in other retailers, but I didn notice some of it in almost all of them, withe exception of Wal-Mart. Wal-Mart is going to take market share big time after this downturn.

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#6) On November 24, 2009 at 2:45 PM, russiangambit (29.27) wrote:

> davejh23, you mean to tell me that empty shelves are a way to mess with my mind?

Lemoneater, the retailers definitely mess with our mind. When I initialy cam to the US I was buying fully priced stuff and I didn't think anything about it. Then somehwere around 2002-2003-2004 I was spoiled by never-ending sales. Since then I never buy someting that is not on sale. I don't care if they have to mark it up first and mark it down later for me, with the same end result, but it has to be on at least 20% sale for my mind to be able to process it as a potential buy, lol.

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#7) On November 24, 2009 at 2:55 PM, TMFLomax (40.58) wrote:

russiangambit

Funny you mentioned Gap/Old Navy. Actually around Halloween I went to Old Navy for the first time in ages and was actually shocked at how much of their stuff I liked (and... well here we go again, with your point about sales, wow, I found cool stuff for 50% off). I have had a thumbs down on Gap in CAPS for ages and have longquestioned whether they could turn things around, but at Old Navy anyway, merchandise seemed better (and I've been hearing buzz about a new denim line at Gap). But, they did so much discounting for so long, you're making a good point that if a lot of the stuff is now full priced, people may not respond... things were so hard for them for so long, I think people got used to sales. We'll see, I guess. Gap should be interesting going forward. 

Another thing on the inventory... purely anecdotal, but I seem to recall during the last recession, there often wasn't a good selection of things when you did try to shop. A lot of stuff was sort of run-of-the-mill. So retailers may now be afraid to take chances with merchandise, but at the same time, a lot of shoppers may want something that excites them to want to spend (excites them or is 50% off, these days, ha). That's a pretty difficult tightrope to walk, and maybe especially so this time around. 

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#8) On November 24, 2009 at 3:08 PM, whereaminow (22.06) wrote:

TMFLomax,

I actually wrote a blog a few days ago stating that I will be shopping more than ever this year because I can't find anything else to do with my cash. (stocks priced too high for me, gold too high, inflation coming, etc.)

In other words, high sales might just be an indication of a society of consumption and weak dollar, rather than any economic growth.  

Despite what bears or bulls say, you can not discern economic growth or a lack thereof from most of the statistics we look at today.

The only way to measure economic growth is this:  How long do you have to work to have the purchasing power to buy the stuff you want to buy?  That number should shrink over time.  If the rate of shrinking slows or stops, you have a problem.

David in Qatar

 

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#9) On November 24, 2009 at 3:13 PM, lemoneater (78.93) wrote:

Thanks for all the insights into the world of retail. Retailers need to watch out: chronic low inventory means that I never think to shop at Sears anymore. Russian, I agree bargain shopping is a way of life for me especially when it comes to clothing. However, I will pay more for fresh juice versus juice made from concentrate and I do buy delicious organic foods when I can as a treat.

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#10) On November 24, 2009 at 4:04 PM, jstegma (29.22) wrote:

I think sales will disappoint. 

It comes down to this - which spends more on Christmas presents? - a guy who is afraid he'll lose his job in the spring or a guy who lost his job last spring and is hopeful that maybe he'll get another one this spring?

And let's not forget that last year credit cards were easier than they are this year.  Credit crunch and frozen credit markets frozen didn't affect credit cards much last year.  Tighter terms are affecting them this year - decreased limits, increased interest rates, etc.

It's gonna be a rough season.  I've been saying it since early last summer.

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#11) On November 24, 2009 at 4:21 PM, TMFLomax (40.58) wrote:

 whereaminow

Very, very good point David and an interesting one too. (Sorry I missed your earlier blog, I have some catching up to do!)

There are lots of moving parts. And maybe a flat-screen TV is a better investment than a lot of stocks right now (and every day I run across some stocks that I can't believe are trading so high under the circumstances). Meanwhile, lots of unemployed consumers, others that are afraid of losing their jobs, others who want to reduce their indebtedness... well, it definitely should be interesting.

(And oh yeah, the consumption economy thing has been bizarre for so long... 70% of the economy, and all that consumption was based on what? For too many, not income, but to a large degree debt and inflated assets. Yuck. A mess.) I'll be interested in seeing how the retailers fare but yeah, is that economic "health" or "growth." Not really.  

I am interested to see what consumers do over this short-term phase but you may be right that it could end up being an upside surprise, maybe for an unexpected reason like "what do I do with my cash, there aren't many good options." But yeah, a return to the free-wheeling debt-driven consumption economy isn't exactly what I'd have in mind as a healthy thing. If we had a real economy I think we'd have a HECK of a lot less retailers than we do now (we don't need this many, again, the bubble floated all boats didn't it...). And still we may end up with a heck of a lot less retailers as some of this corrects (although everybody's doing all they can to avoid the correction, aren't they...).

But yeah I'd rather have a flat-screen TV at a good price than garbage like AIG... not that every stock's garbage right now but there are a lot of them and the speculators are gobbling them up.

P.S. I still think Snuggies are half kitschy funny, half one-of-the-four-horsemen-of-the-apocalypse. Haha.

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#12) On November 25, 2009 at 2:49 PM, TMFLomax (40.58) wrote:

jstegma

Agreed, that aspect is definitely a major big deal these days... A lot of people seriously don't have the resources (and have good reason to save the ones they do have). Meanwhile, one of today's top headlines on Yahoo! Finance says consumer sentiment has improved a tad from earlier in November (huh?), but was still down from October. I think that's a really weird thing to cover, i.e., let's try to find something positive to say right now... 

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