Terrible Start For Retailers’ Holiday Sales?
I never do the early morning Black Friday sales blitz, but I didn’t end up at a Lowe’s store at about 10am on Friday. I was there to buy some car wax to wax my car with later that day. I was shocked to see not that many shoppers and a ton of “doorbuster” items still in stock. I walked by a Black & Decker drill bit set for $15.00 and liked the deal, so I bought one. Other than that, I stuck with the few items I was there for.
Today (Saturday), I visited the Best Buy near my home about 30 minutes after they opened their doors
and there were literally no shoppers in there. They were extremely overstaffed and due to no shoppers, I received a great deal of attention. I was asked if I needed any help by a different Best Buy employee seven times in about seven minutes of being inside the store. I left without buying anything.
One thing is for certain: retail numbers are going to be weak this holiday season. Will they be so weak that certain retailers do not recover and suffer the same fate as Circuit City or Linens n Things? I have heard of many people warning against buying gift cards with various retailers because of the risk they might go under. I have heard Dillard’s is on that list. If you know other names on this list, please add them in the comments below.
In the brief trading session on Friday, I opened a short position in the Consumer Discretionary ETF (XLY). The market rally last week plus what I believe will be terrible black Friday numbers might present the opportunity for a turn down in this ETF. I will probably take my gains in the ETF fairly quickly if the opportunity presents itself.
As for stocks, the only consumer discretionary stock that I like is Apple, but I believe we might see even better buying opportunities for Apple in the future. I think they will meet expectations and continue to bring in incredible amounts of cash flow, but I’m not sure they will blow away numbers like in the past. Buy Apple on dips. I would definitely avoid most if not all other retail companies. I think your only position in retail should be short.
Also, will we see significant weakness in commercial / retail real estate as a result of some major retail chains going under? Check out my previous article on a potential coming commercial real estate crisis.
In the meantime, what are your holiday spending plans? I’m estimating that my wife and I spend about 25% of what we did last year. Are your plans similar? Are you getting creative in holiday gifts to avoid big ticket items?