J.C. Penney (JCP:NYSE) has filled our rural mailbox with circulars replete with photos of grinning tweens draped in the latest back-to-school fashions.
Staples (SPLS:NASDAQ) apprises us daily regarding their wonderful newfangled must-have notebooks and self-correcting pencils.
Bed Bath and Beyond (BBBY:NASDAQ) has killed an entire forest in their attempts to get us to come in for new appointments for the girls’ rooms.
And Apple (AAPL:NASDAQ) sends us e-mails once an hour touting their latest thimble-sized jukebox.
I’ve got bad news for the lot of them: It ain’t working!
|
Hey, don’t look at me; I just earn the money. It’s my wife who decides when to spend it. And right now, she furious, and isn’t spending a nickel she doesn’t have to.
The other night, I came home from a long day of slapping typewriter keys (a task she is still not convinced qualifies as “work”). Upon arrival, I walked into a veritable hornet’s nest of angry moms.
The subject du jour (besides lazy husbands)? How much stuff costs this summer! Milk! Gas! Bread! Cucumbers! Underwear!
If the manager of our local Safeway (SWY:NYSE) had walked in that door, they would have beat him, stoned him and strung him up.
Fortunately for him, that didn’t happen. Instead, they were plotting out their revenge in a more practical manner: They would take it out on the kids by trading t-shirts, jeans, backpacks, lunch bags, desks, notebooks -- anything the older kids haven’t totally destroyed that could be swapped out, cleaned up, patched and sent back into service one more season.
The younger kids are already screaming in pain at the mere thought of a season in hand-me-downs.
American retailers will be, too, as soon as the message sinks in.
MacMillan-Doolittle’s Anne Brouwer says (via smartmoney.com), “Back to school is an extremely important time period for retailers, second only to holidays, and in some cases, more important.”
In point of fact, this year Christmas in July may be more important than any other retail season -- period. Because many stores simply aren’t going to make it to December.
You’ve already read the obits for Steve & Barry’s and Cali-based Mervyns department stores? Suppliers are cutting them off for non-payment.
Linens ’n Things, Goody’s Family Clothing, Sharper Image (OTC:SHRPQ) and Starbucks (NASDAQ:SBUX)? You can hear the thunder of slamming doors all the way out in the mall parking lot.
What can the survivors do to “stay on the island”? Anything. Everything!
The National Retail Federation’s Mike Gatti makes this point clear: “The consumer is struggling with gas prices and food prices. So retailers know customers are going to be making some choices. Campaigns are getting more interesting. It’s not just TV or print advertising. It’s event-driven as well.”
And is trotting out Bo-Bo the Clown to run around the mall, handing out Staples “Shop Smart for College Sweepstakes” tickets working?
2007’s 2.9% annual growth was considered tepid at best, a worrying sign of looming disaster. This year, the most optimistic estimators are calling for half that.
Right now, retail is actual mounting a bit of a rally. Don’t let Wall Street’s smooth talkers and storytellers fool you! The Grinch has September in pocket and is already drooling over December.
Looking to the sector’s chart, I’d have to say that they are too optimistic by half. I see the top retail stocks in the country falling, as a group, at least 20% -- and, quite possibly, even 30% or more. If you are looking for a particular victim to play short, I recommend mid-dated puts against J.C. Penney (JCP:NYSE).
Yours truly,
Adam
