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Thread: weekend commentary - 'barometer' event occurring this week

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    Banned Melonie's Avatar
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    Default weekend commentary - 'barometer' event occurring this week

    The friday after Thanksgiving has traditionally served as an excellent 'barometer' of retail 'holiday' sales levels ...

    (snip)"Perhaps the most alarming impact will be on the consumers of the rich world, whose confidence in the future will be vital in preventing recessions turning into depressions. Next week marks the traditional beginning of the US Christmas shopping season with “Black Friday”, the day after Thanksgiving when stores see some of their heaviest business of the year.

    The term has traditionally been taken to mean the date that retailers’ finances went into the black, or the heavy road traffic that used to ensue from millions of Americans making pilgrimages to worship at the retail shrine. But if the dire news from across the US economy has sunk in even among the world’s most optimistic shoppers, it might instead mark another dark day for the US economy.

    This week, perhaps the clearest possible signal of the trouble that US retailers are in came from their counterparts on the other side of the Atlantic. Marks and Spencer, the store that above all others defines the British high street, announced a highly unusual snap one-day 20 per cent sale. Some described it as a “guerrilla raid”, but in truth it was more like the return of fire in a skirmish with its retail rivals, which had already announced pre-Christmas sales.

    But while one-off cuts in prices might tempt consumers to spend, economists warn that people might merely begin to expect that prices will continue to fall in the future, and so hold off spending. The US economy in particular is likely to see headline inflation go negative next year, as the effect of the huge fall in oil prices takes hold and the American housing bust drives down the cost of renting and owning homes.

    In theory, such deflation could be good for the economy, as it releases money for consumers to spend on other products. But as Andrew Brigden of Fathom Consulting warns, deflation can also take a malign form. “The risk is that people don’t spend because they think prices will be yet lower in the future and that sets off a negative spiral,” he says.

    Temporary drops in prices are unlikely to have that effect. But Mr Brigden thinks the combination of falls in commodity and house prices with weak demand means that US headline inflation is likely to go negative next spring and stay that way for months, dropping as low as minus 3 per cent. “When deflation goes on for the best part of a year, expectations are more likely to become entrenched,” he says.

    Certainly any consumers watching the flow of news this week cannot have helped but wonder. Yields on two-year Treasury bonds, an indication of where investors think that the US Federal Reserve will set interest rates over the next 24 months, dropped below 1 per cent to their lowest level since the two-year bond was invented in 1976. British bond yields hit their lowest since the second world war"(snip)

    from

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    God/dess Deogol's Avatar
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    Default Re: weekend commentary - 'barometer' event occurring this week

    Very interested in the results of that weekend.

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    Senior Member Butrcup98's Avatar
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    Default Re: weekend commentary - 'barometer' event occurring this week

    My husband said that his company makes 25% of their yearly income in the month of December.

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    Default Re: weekend commentary - 'barometer' event occurring this week

    ^^^ actually, the naming of the friday after Thanksgiving as 'black friday' is a reference to the fact that, for most US retailers, this is the day where net profits for the year finally exceed net operating costs. The 'talking heads' on the financial news networks are using the term 'red friday' this year ... in anticipation that customer spending thus retailer profits will be down significantly versus previous years.

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    Default Re: weekend commentary - 'barometer' event occurring this week

    well, some early results are starting to appear. However, they must be taken with a 'grain of salt' -

    - volume of customers is estimated to be up by 17% YOY ... which in and of itself is fairly meaningless other than the probability of being trampled.

    - volume of customer dollar spending is up by 2-3% YOY (depending on the survey)

    - a significant amount of dollars were spent on 'doorbusters' i.e. 50 inch flat screen tv's being offered for $899 ... which in and of itself doesn't help the retailer's bottom line a bit.

    - sales dollar volumes tended to be concentrated in the WalMart sector and the very upscale luxury goods sector

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    Default Re: weekend commentary - 'barometer' event occurring this week

    and here is a more 'official' update ...

    (snip)"J.C. Penney Co., Nordstrom Inc. and Gap Inc. all reported sales drops of 10 percent or more at stores open at least a year. The decreases were less than some analysts estimated after 50 percent-off discounts lured customers grappling with the U.S. recession. Wal-Mart Stores Inc. posted a 3.4 percent gain, beating its forecast.

    Declines in consumer spending in October persisted into the first part of November before rebounding after the Thanksgiving Day holiday. Retailers may need to keep promoting half-off markdowns over the next three weeks to attract customers, even though such sales erode margins during a period when they make a third or more of their annual profit.

    “The promotions are pretty much across the board in retail, and some are the biggest you’ve seen in years,” said David Abella, a portfolio manager at Rochdale Investment Management LLC in New York, with $2 billion in assets including Wal-Mart shares. “They will need to keep that up through December to draw traffic and sales.”

    Even with the Black Friday discounts, November same-store sales fell 2.7 percent, the International Council of Shopping Centers said, based on a survey of 37 chains. That’s the biggest drop since the ICSC began tracking data in 1969. Excluding Wal-Mart, sales plunged 7.7 percent.

    The day after Thanksgiving is called Black Friday because retailers were said to turn a profit for the year on increased holiday sales. "(snip)

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