The Outlook for Holiday Retail Sales
MADELEINE BRAND, host:
With us now for a broader look at the retail environment is Howard Davidowitz. He's chairman of the retail consulting and investment banking firm Davidowitz & Associates. He joins us from Manhattan.
And welcome back to the show.
Mr. HOWARD DAVIDOWITZ (Chairman, Davidowitz & Associates): Thanks for inviting me.
BRAND: So, so far, what kind of year has this been for retailers?
Mr. DAVIDOWITZ: So far, things have been pretty mixed. You know, if you look at, for example, last month, we got a lot of numbers. National Retail Federation says it's great. I say it was down .9, because when you include autos, of course, it was down .9. And I don't know how you can take autos out of the retail number since auto and auto-related is 30 percent of the action. So what we've got is a very mixed picture, and it's the same with the retail chains. Some are up, some are down.
BRAND: And how does it compare to last year?
Mr. DAVIDOWITZ: It's a little bit ahead of last year, and that's going to continue through the holiday season. We'll have a slight increase for the year. And in the first quarter, we'll totally collapse--we'll go to negative, because then we've had the free lunch. And that's when we buy dinner in the first quarter, because that's when all the home heating-oil bills come in. Consumers have no savings, the highest debt we've ever had, rising interest rates. The whole picture is terrible. And that will all start to happen in the first quarter.
BRAND: Wow, that sounds really bad. Well, let's not go there right now. Let's focus on the next few weeks, the holiday shopping season. Now a lot of analysts are saying because gas prices are dropping, consumers will feel freer to go retail shopping.
Mr. DAVIDOWITZ: I think that's a good point and I do think that's helping. At the end of the day, if you look at the whole picture of what's going to happen, got a very mixed picture in department stores. You got extreme-value retailers like, you know, Family Dollar, 8,000 stores; Dollar General, Dollar Tree, Fred's, 99 Cents--those'll go to all negative, all down, all missing-earnings estimates. You got the traditional discounters--Wal-Mart, Target, Costco--all doing well and OK. And then you got speciality stores. Let's look at them. Largest speciality store in America, Gap, down. Second-largest speciality store in America, Limited, down. Then you got a lot of speciality stores going up. Abercrombie & Fitch, Chico's, American Eagle Outfitters, they're up. I say it's a mixed bag because that's what the facts say.
BRAND: Well, tell me why. Tell me why it's a mixed bag. Why is Gap down and Abercrombie is up?
Mr. DAVIDOWITZ: Because of fashion. Gap missed the fashion. They got a new president. They're focused on research. You don't do fashion through research, so the whole Gap is in the tubes. Limited Express is a disaster and ultimately will be--have to sold off. It's a cadaver. Sears is going to be terrible. Kmart is going to be terrible. When you look at the whole picture--Penney is OK--it's mixed because a rising tide lifts all boats. We don't have a rising tide. Look for the food industry to do poorly. How well--Albertson's has put itself up for sale. Winn-Dixie is in bankruptcy. Safeway's in the tank. I mean, that's the American food industry. Sure, Whole Foods is doing great, but that's a peanut company. How well is Toys "R" Us? We're talking about Christmas, you and I, right?
Mr. DAVIDOWITZ: How well is Toys "R" Us going to do? They're in the tank! How well is KB Toy going to do? They just came out of bankruptcy! They closed 600 stores! So it is not an easy picture. We've got 19 square feet of retail space out there for every man, woman and child in America. Online sales are doing tremendous! It's up 25 to 30 percent, so think about this. Here are these lunatics out there building more and more shopping centers and what are Americans doing? They're buying online! Does this make any sense to you, exploding all that Easter--the fastest growing channel is online sales. Don't you think that's going to impact real estate? I think so. So maybe these guys ought to inject themselves with some sanity. Even though they can get all the money they want, nothing makes sense.
BRAND: Wow. Thank you for trying to make some sense of it. Howard Davidowitz is chairman of the retail consulting and investment banking firm Davidowitz & Associates. And he spoke to us today from Manhattan. Thanks, Howard.
Mr. DAVIDOWITZ: Thanks for inviting me.
BRAND: Happy shopping.
Mr. DAVIDOWITZ: Thank you.