With the noatable execption of Wal-Mart, the past week has brought a string of stronger-than-expected fourth-quarter results from major retailers. Stores such as Saks, Target, Sears, TJX and Macy's reported sharp year-over-year profit increases.
The results would seem to justify the roughly 40% rally in the retail sector in the past year. But if the stock market really is forward looking, the future is not looking as bright; most retailers were dealing with very easy year-over-year comparisons and and several offered cautious guidance after reporting "blowout" fourth-quarter earnings.
"Longer term you have to be concerned about deleveraging [and the] lack of credit availability," says Barry Ritholtz, CEO of Fusion IQ and author of Bailout Nation.
The combination of consumers actively "getting out of all the excess credit they took on," plus stagnant wages means continued downward pressure on retail sales, Ritholtz says. In addition, the kind of sharp decline in consumer confidence as reported this week is generally "not pretty for the stock market," he says.
"Things are not in that frozen wasteland what we saw [a year ago] but people are dealing with difficult times," he says. "People are doing a little more spending but there's little evidence of a V-shaped recovery."
Are consumers changing the way they are spending? We discuss this on class the other day, how consumers saving more will cause a dowfall in the economy because no money is been spend.Is the recessino still affecting us now?
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I am not changing the way I am spending my money. I am still saving as much as I can by not buying as much and going to lower priced food and clothing stores. It may be a budgeting tactic or an age variable. When I was 13 I went out with whatever money my parents gave me, telling me that they wanted change back.
ReplyDeleteHowever, I don't expect the majority of America to change the way they spend their money this soon. People aren't going to go back to their previous budgets and shopping sprees at least until the unemployment rate changes and people can afford their houses. E
I think consumers are changing the way they spend. People are willing to buy the Kroger brands instead of the name brands because with less money to spend, less will be spent on luxuries. You aren't going to buy a BMW if you can only afford a Toyota. I think the recession is still affecting us because the unemployment rate is still high and companies aren't willing or able to hire more employees yet. E
ReplyDeleteI definitely agree with Nick and think that consumers are changing the way they spend money. I think the recession has taught a lot of people that they need to be more responsible with their money and how they spend it. Like Nick mentions above, I know from my own experience that I will buy off-brand products if it saves me money. Consumers are much more conservative because extra spending money is just not something that most people have these days. E
ReplyDeleteI agree that the recession is forcing a lot of consumers to change how they spend. Personally, I will usually buy cheaper off brand products to save money. However, I also try to buy things that are durable enough to last a while. I think that people are more conscious about where and how they spend their money because of the recession.
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