Thursday, May 05, 2016

The True State Of The US Economy: Retail Companies Reporting Sales Targets Missed

In the free world economies are only as financially healthy as the consumers that feed them.

And when one looks at the latest sales figures reported by six major American retailers today, they suggest the US economy (and therefore the economies of Europe, Japan and Australia - and China, India, Indonesia and others that rely on western consumers) have big problems that governments would rather we did not know about. You see all those major retailers missed their targets, not by a whisker or a cicarette paper or any other measure of a fine margin, but by significant amounts.

As Bloomberg observes, each of six companies, among which L Brands, Zumiez, The Buckle, Costco, The Cato Corporation and Fred's - that reported April comparable sales missed estimates compiled by Retail Metrics.

Among the reasons given by retailers for the weakness were the shift of Easter to mid-March this year from early April last year, and the old standby, rainy weather.

The worst miss was at Buckle, which fell short of estimates by a whopping 660bps*, followed by Cato’s miss of 500bps; L Brands’ Victoria’s Secret also missed by 500bps; on the other end, Zumiez’s April comp. sales missed estimate by just 60bps, the narrowest miss of group.

Investors promptly dumped the companies stock, sending the shares in L Brands Inc., owner of the Victoria’s Secret and Bath & Body Works chains, plunging the most in six years to the lowest level since November 2014. Others did not do better: ZUMZ -8%, BKE -6%, COST -2.1%, CATO -1%, FRED -6%.

Which should not come as a surprise: considering in the past several months we have seen bankruptcies by famous retailers such as American Apparel, Caché, Wet Seal, Quiksilver, and Pacific Sun, Eastern Mountain Sports, Sports Authority, and just yesterday, Aeropostale, perhaps it is becoming clear why the state of both the American consumer, and the American economy, is as poor as it appears to everyone, if not those happy few who see nothing but green shoots and "fiction peddlers." Clearly 'the recovery' that did not happen is going to be another historic failure for Obama's failed Presidency

*bps - basispoints, i.e. one hundredth of one per cent, thus 100bps=1%


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