"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

11 December 2006

Federated, May Stores Sucking Xmas Wind

With the home equity withdrawals approaching $1T over the past five years, but slowing sharply, is it any wonder that consumers are being forced to cut back?

Retail shoppers may be playing chicken
By Jennifer Waters, MarketWatch
Last Update: 12:32 PM ET Dec 11, 2006

CHICAGO (MarketWatch) -- Where are all the shoppers?

Spot checks at shopping centers throughout the last week found foot traffic lackluster by several holiday-shopping-period comparative measures. Britt Beemer, founder of America's Research Group, was so worried that he lowered his sales-growth estimate to 2.7% from 3.1%. "The lack of a 'must-have' item for Christmas and the lackluster way retailers have approached the Christmas season this year compels me," Beemer said. It is only the fourth time in his 20 years of forecasting that he's trimmed his holiday forecast. "Shoppers are just not seeing the excitement at the stores," he added.

Or they might be playing a particularly hard-nosed game of chicken with retailers during the most crucial shopping period. Many retailers ring up 40% to 60% of their annual profit during the November-December period, with some reaping as much as 80%.
If this is a game, according to Ann Poole, a Kevin Dann & Partners analyst, then customers have won. "While we have not yet turned into a total Scrooge for the holiday season, we have become less jolly about the outlook," she said in a research note. Her checks last week at five shopping malls in key cities in Texas, ranging from centers with high-end retailers like Nordstrom (JWN)were disappointing. "We believe [the holiday season] is off to a slow start," she said. The National Retail Federation has predicted shoppers will spend an average of $735 apiece this year on gifts, home d├ęcor and wrapping paraphernalia. But now analysts are thinking that consumers will wait until the very end -- maybe even the last two days ahead of Christmas -- before they shop in full force. Chief among the reasons: discounts.

According to America's Research Group's latest poll, nearly 59% of Americans have not yet purchased gifts. "If shoppers don't see 50% off this season, nearly 40% will either buy fewer gifts, buy less expensive gifts or will buy gift cards," Beemer said.

Morgan Stanley analyst Gregory Melich said it's too early to be a doomsayer.
"Santa is still coming to town," he said in a research note. Despite a slow start, Melich is still looking for a sale-growth rate of 5%. The most challenged? To Melich's thinking, it's still Federated Department Stores, which is still having integration issues with September's switch of nameplates, merchandising and marketing at 400 former May Co. stores.

Federated Department Stores Having a Horrible Xmas Selling Season

If you're FD's managers, you simply blame May's former management team:

"In part, the sales lag in former May (stores) can be attributed to intense promotional activity last year, which we chose not to repeat, thus creating unfavorable year-over-year comparisons," said Terry Lundgren, Federated's chairman, president and chief executive officer, in a statement.


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