Thursday, January 15, 2009

Worse News for Retail?

Last week I called one of my former CEOs, a serial entrepreneur named Dave, to wish him a happy new year and to shoot the breeze. I like keeping in touch with old colleagues and friends, and especially ones that I respect and appreciate, and this gentleman is such a person. Dave is a Harvard Business School MBA and a highly intelligent guy. He has been in retail and retail concept development for pretty much his entire career. His most recent venture is an 8 store personal care retail chain - similar to Body Shop - which he had apparently acquired in the past year.

Unfortunately, Dave's business update was all bad. According to him sales pretty much collapsed in December. He wasn't talking about a 4% - 5% decline, he was talking about a complete route. According to him the chain's flagship store that until recently was averaging about $1,000 in sales per day, saw average sales numbers of about $300 per day in December. Dave told me that unless things turn around in a hurry, the chain will have to fold in the next two months...

Dave explained to me that Department of Commerce statistics regarding retail sales, which have recently been showing consistent but relatively mild declines, are misleading. He claims that these numbers are greatly skewed by such retail behemoths as Wal-Mart and Target. People still have to buy the basics and they are apparently flocking to discounters. However, he says that any retail business that relies on anything that is remotely considered a luxury has been in complete collapse. That's not encouraging, but it's understandable from a personal finance perspective - hell, we've been cutting back ourselves.

With respect to the economy as a whole, I continue to believe that we are pretty close to the bottom of the cycle. I believe that massive fiscal and monetary stimuli will work their way through the economy and ultimately lead to a recovery. With respect to the stock market, I still believe that we are within 10% to 15% of a market bottom - which we may have already seen. The job market will no doubt continue to see a painful contraction for the next year. 

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frugal zeitgeist said...

I'd like to believe we're nearing the bottom of the cycle, but I don't think we're going to start to see a turnaround until 2010. I'm already considering 2009 a total write-off. Too pessimistic? I'd be delighted to be wrong.

Shadox said...

You may be right about 2009 being a bad year, but I am not quite willing to concede that yet. Things are looking pretty grim, but I get the sense that people are expecting much worse than what will actually happen. If that's true, we may see a nice rebound in both the economy and the stock market.