Wednesday, May 18, 2011

Retailers the next leg to fall

Low-to-Mid end stores are reporting more cautious customers, spending on necessities such as food and gasoline and not the others.

From Reuters,
In general, retail earnings looked all right in the quarter ended around April 30, said Kurt Salmon retail strategist John Long, but shoppers were largely absorbing higher costs just on food and gasoline and had yet to face looming increases other goods.

"We're already starting to see a little bit of margin pressure," Long said. "And we think that as we get into the summer and fall, when we see bigger price increases ... that may cause some consumers to pull back."
............................At BJ's, the No. 3 U.S. warehouse club chain, shoppers traded down in both brands and package sizes, Chief Financial Officer Bob Eddy said during a conference call.

............................The U.S. recovery will continue to be slow and uneven, particularly for more moderate-income households, Target (TGT) Chief Executive Gregg Steinhafel said during a conference call.

.............................Wal-Mart Stores Inc (WMT) said its customers were showing pronounced signs of living paycheck-to-paycheck, as sales at its U.S. discount stores open at least a year had fallen for two straight years.

In my opinion, as long as gasoline prices stay close to $4 at the pump, this is going to be a slow and long summer and even fall for many retailers, especially those with very little margin to squeeze such as discounters, supermarkets, low-end department stores as they start to pass on cost increases to customers in the next few months.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not have positions in the above stocks in her personal account as of May 18, 2011

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