Tuesday, November 20, 2007

Retailers Facing Tougher Christmas Season

From Bloomberg:

Clothing chain Limited Brands Inc., based in Columbus, Ohio, will probably show that it broke even in its third quarter, according to 19 analysts surveyed. That would be the company's worst earnings performance in two years.

Merchants including Kohl's Corp. said they're planning conservatively next year after third-quarter sales trailed predictions.

Lowe's, based in Mooresville, North Carolina, lowered its earnings forecast for the rest of the year ending Feb. 1 as it reported a 10 percent drop in third-quarter profit amid the worst U.S. housing recession since 1991.

Last week J.C. Penney Co., the third-largest U.S. department-store company, and Seattle-based Starbucks Inc., the world's largest coffee-shop chain, also reduced their profit outlooks, as did Atlanta's FedEx Corp., the second-largest U.S. package-shipping company.

``A weakening housing market continues to take a toll,'' Brian Nagel, an analyst with UBS Securities LLC, wrote in a note yesterday.

Cost of Heat

So are consumer debt levels, rising gasoline prices and higher home-heating costs, according to a survey released yesterday. The research, by the Consumer Federation of America and the Credit Union National Association, found that 35 percent of Americans polled said they intend to lower their holiday spending this year, the most in eight years and up from 32 percent last year.

Also from Bloomberg (from an Office Deport Story):

``The overall retail environment is tough, especially with consumers and small businesses who tend to mirror overall consumer behavior,'' Anthony Chukumba, an analyst at FTN Midwest Securities Corp. in New York, said yesterday. ``They've gone overboard with cost-cutting, and it affects the in-store experience.'' He recommends holding the shares.

Now -- every year that I can remember there have been warnings about consumer spending slowing down. These reports don't count on the fact the US consumer loves to ship and will do anything to keep on shopping. It's that simple.

However, the article points to some serious issues: falling homes prices, high energy costs and high consumer debt levels. One of those would probably not be enough. But three -- together? That could be.