Posts Tagged ‘retailers’

Commercial Real Estate (CRE): The Slow-Mo Cliff-Dive Gathers Speed

Commercial Real Estate (CRE): The Slow-Mo Cliff-Dive Gathers Speed

cre marketCourtesy of Charles Hugh Smith, Of Two Minds

Commercial real estate is in a structural cliff-dive, currently in slow-motion but soon to gather momentum.

With all the hub-bub about the foreclosure crisis in residential real estate, commercial real estate (CRE) has fallen off the radar screen of crises. Don’t worry, it’s still careening off the cliff; the fall is just in slow motion.

No need for a fancy report to see the signs of decay in CRE. Signs of the ongoing CRE meltdown are everywhere--empty storefronts, mall shops and vacant office complexes abound.

The causes are all too familiar: lending standards went out the window, banks loaned too much, buyers paid too much, lousy deals were avidly securitized, cash flow projections entered Fantasyland and unhealthy speculation fed widespread fraud.

Since boom-and-bust cycles of overbuilding and retrenchment are endemic to commercial real estate, it’s tempting to view this as just another post-expansion trough. Since prices have already slipped a staggering 40% from the 2006 peak, those calling this the bottom of the current cycle have some history on their side.

But beneath what appears to be a standard-issue retrenchment--a glut of inventory to work through, lenders avoiding risk instead of embracing it, and so on--structural changes in the U.S. economy are changing the CRE landscape for good--and not in a positive direction.

A long-term structural decline in CRE is not just a real estate industry concern. With some $1.7 trillion in CRE loans needing to be refinanced in the next few years, a continuing decline in CRE values could push the still-fragile banking system into a new crisis and the economy back into recession as early as next year.

The extremes reached in the boom were certainly epic: investors paid $800,000 per resort hotel room and over $500 per square foot for Class A office space, numbers which no terrestrial cash flow could possibly justify. Retail centers sprouted alongside every new exurb subdivision.

cre - commercial real estate

By this logic, an unprecedented boom requires an equally unprecedented bust to work through the excesses in price, debt and risk. So far so good, but there is an anecdotal body of evidence which suggests that profound systemic changes are taking place in the U.S. economy which will structurally reduce the demand for commercial real estate--not for a few years, but permanently.

1. A significant portion of CRE
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Frugality the New Reality in Australia; Predatory Customers Addicted to Discounts

Frugality the New Reality in Australia; Predatory Customers Addicted to Discounts

Courtesy of Mish 

LONDON, ENGLAND - NOVEMBER 27:  A man views the discounted items for sale in a branch of Books Etc which has gone into administration on November 27, 2009 in London, England. The nationwide book chain, along with its sister brand 'Borders', is seeking a buyer for all of its 45 stores. Increased competition from supermarkets and online bookstores are being blamed for the chain's decline. (Photo by Oli Scarff/Getty Images)

I have commented many times on US Consumer and Corporate Frugality but inquiring minds might be interested in happenings down under. Frugality has gone global.

Predatory Customers Addicted to Discounts 

The Herald Sun reports Retailers could take years to recover because customers addicted to discounts.

A bargain frenzy since the global financial crisis has led consumers to expect and accept only slashed prices.

The dire forecast, from market research company TNS director Chris Kirby, comes as bored staff in some stores are put to work cleaning, tidying and changing window displays because of a lack of customers.

At some sites, especially fashion outlets, stock is discounted by up to 70 per cent as soon as it hits shelves to attract shopper interest.

"Consumers are no longer willing to accept the first price they find. They know there’s a good chance of finding it cheaper somewhere else," Mr Kirby said. "In essence the industry is training us to become professional, if not predatory, consumers."

The caution came as a Commonwealth Bank economic index that tracks credit and debit card transaction value trends across a wide range of industries reported the weakest spending since the height of the global financial crisis in early 2008.

Desperate Retailers Slashing Prices by 75 Percent 

NEW YORK - FEBRUARY 12: A '75% Off' sign is seen February 12, 2009 in the Brooklyn borough of New York City. U.S. retail sales unexpectedly rebounded 1.0 percent in January after dropping for six months in a row, according to the Commerce Department.  (Photo by Mario Tama/Getty Images)

Please consider Retailers slashing prices by 75% as Queensland sales slow

One retail organisation, the United Retail Federation, said the slump was at its worst in Queensland, where small retailers were struggling to move stock, even after heavily discounting items.

The bleak picture is at odds with scenes of hundreds of shoppers queuing at lay-by counters to take advantage of major toy sales.

Thousands of bargain hunters queued at Big W stores for the start of its two-week toy sale, which ended last week.

One Gold Coast shopper complained of a four-hour wait at her local Big W store, and of being hit in the ankles with shopping trolleys in the stampede.

Target will follow with its toy sale from July 22 to August 4, having already released its 72-page catalogue offering 120 half-price bargains.

But Australian Retailers Association director Russell Zimmerman said retailers generally were finding it difficult to clear stock, even at hefty discounts. "It’s tough out there and retailers are finding it harder


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CITI: RETAILERS LOOK “WORRISOME”

CITI: RETAILERS LOOK “WORRISOME”

Courtesy of The Pragmatic Capitalist 

Neon sign for caf? and market at dusk

Retail stocks continue to hit new 52 week highs just about every day.  As we noted last week, the discrepancy between the retail stocks and reality appears to be growing with every uptick.  Citi recently issued a note expressing the same belief:

“The S&P 500 Consumer Discretionary sector’s Retailing industry group looks worrisome. While retailing stocks have been very powerful performers this year, up almost 2x the S&P 500’s gain year to date, there are several reasons to become concerned about the group’s potential trading trends in the next year, ranging from fundamentals, to earnings revision momentum and to valuation. Moreover, potential equity market weakness mid-year could generate meaningful near-term profit-taking as portfolio manager conviction seems shallow. Therefore, a “downgrade watch” alert from Market Weight is appropriate.”

Source: Citi Research


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Rosenberg: The Truth About Retail Sales Is That They Still Stink

If anyone can explain why the retail sales weren’t really that good, it would be David Rosenberg, over breakfast.  - Ilene 

Rosenberg: The Truth About Retail Sales Is That They Still Stink

Glass of milk with fruits

Courtesy of Vince Veneziani at Clusterstock 

In this morning’s Breakfast With Dave newsletter, analyst David Rosenberg talks last week’s retail sales report.

Don’t believe everything that you read, says Rosie. According to "raw data," retail sales actually FELL1.6% month-over-month in February, and you can’t just blame seasonality for this.

Breakfast With Dave: “It’s always best to look at what consumers do rather than what they think or say. They’re spending — that’s the main thing”. That goes down as the glib remark of the weekend — front page of the Investors Business Daily (Shoppers Perk Up, Lifting Retail Sales, By A Surprise 0.3%). Another pundit said pretty well the same thing in Barron’s and following the data on Friday there was an economist on CNBC who said that you never win by betting against the U.S. consumer.

What a load of you-know-what.

Let’s more closely examine that retail sales report.

First, the raw data actually showed that sales fell 1.6% MoM in February. Now it would be meaningful if February was usually a weak month for sales compared to January so that it would make perfect sense for the seasonal adjustment factor to give the raw data an upward skew. But in fact, retail sales rise over half the time in February. And while, on average, the not seasonally adjusted retail sales data are down 0.4% in each February over the past decade, the reality is that this past February was four times as bad as the norm — not to mention tied for the third worst February since 1998. Really good result, eh?

Second, here we have the greatest stimulus experience in seven decades and retail sales are still down 5% from the pre-recession peak and on a per capital basis are down 8%. Sales are actually lower today than they were in January 2006 — four years ago — even though the population has risen 4.3% over this time. And on a per capita basis, retail sales are no…
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Credit Card Charge-Offs Rise In November, Breaking Two-Month Streak

Credit Card Charge-Offs Rise In November, Breaking Two-Month Streak

Courtesy of Vince Veneziani at The Business Insider/Clusterstock

credit card sticker amex visa discoverDisappointing news on the consumer front, courtesy of the latest charge-off numbers:

WSJ: The rate of charge-offs on U.S. credit cards rose more than a half-percentage point in November, snapping a two-month run of drops from an all-time high in August, and delinquencies rose for the fourth consecutive month, Moody’s Investors Service said.

Charge-offs, which are those loans a credit-card company doesn’t think it will be able to collect, were 10.6% for November, compared with 10% in October. The ratings firm also said the delinquency rate, which gives a glimpse of issuers’ potential losses and how much they may need to set aside in reserves, rose to 6.2% in November.

Read the whole story — >

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Small Business Bankruptcies Shoot Up 81% In California

Continued divergence in the two different worlds, the stock market world and the other one that most people live in… Ilene

Small Business Bankruptcies Shoot Up 81% In California

arnold schwarzenegger knifeCourtesy of Vince Veneziani at The Business Insider

Owning a small business in this economy is tough, but it’s a whole different ballgame in California:

LA Times: As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration’s office of advocacy.

California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year. Filings nationwide were up 44%, according to the credit analysis firm Equifax Inc.

Read the rest of this story ->


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The Christmas Retail Rally Could Be Toast

The Christmas Retail Rally Could Be Toast (WMT, BBY, RTH)

Courtesy of Vincent Fernando at Clusterstock/business Insider

Shown below is a retail proxy, the Retail HLDRs Exchange Traded Fund (RTH). It’s outperformed the S&P500 on a three month basis. Yet Best Buy’s (BBY) warning today, that revenue will be driven by lower-ticket items in the fourth quarter, could mean that the pre-Christmas retail rally shown below is toast.

Note how Best Buy dropped a nasty 7% on just these decent earnings. A lot of holiday cheer is already priced-in.

bby

 


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Gallup: Spending Down Across Incomes; WSJ: Stores Face Discount Dilemma

Gallup: Spending Down Across Incomes; WSJ: Stores Face Discount Dilemma

Sale tags attached to hanging clothes, close-up

Courtesy of Mish

Retailers hoping for strong sales after a rebound in the stock market and housing are out of luck according to the latest Gallup Poll on shopping habits. Please consider Upper-Income Spending Reverts to New Normal

In a sign that the new normal in consumer spending continues unabated, upper-income Americans’ self-reported average daily spending in stores, restaurants, gas stations, and online fell 14% in November, reverting to its relatively tight ($107 to $121) pre-October 2009 average monthly range. Middle- and lower-income consumer discretionary spending increased by 7% last month but remained in its tight 2009 average monthly range of $52 to $61. Still, consumer spending by both income groups continues to trail year-ago levels by 20%, even as those comparables have gotten easier to match — possibly dashing hopes that upscale retailers and big-ticket-item sales will do better this year.
[click on charts to enlarge]

Spending By Income Level

Spending vs. Year Ago

The hope was that the surge on Wall Street and the seeming stabilization of housing values had encouraged some upper-income consumers to abandon the 2009 spending new normal. November’s results dashed these hopes, as upper-income consumers joined their middle- and lower-income counterparts in spending 20% less than they had during the financial crisis days of 2008 and returning to the relatively tight 2009 daily spending range for this group prior to October.

Spending New Normal

The year-over-year differences have declined somewhat during recent months, but much of this closure in the 2008-2009 spending gap is a result of the easier spending comparables from last year’s financial crisis.

On a national level, the spending new normal suggests slower economic growth than otherwise might be expected in the years ahead.

Supermarket shopping trolley piled high with bags of shopping

While the spending "new normal" may not be good for the larger economy in the short-term, it may be seen as a strong positive for individual consumer households. Consumers, like their business and banking counterparts, would be well-served to de-leverage by spending less, saving more, reducing their use of credit, and thereby strengthening their personal balance sheets. While this may not provide the immediate-term returns to the economy of the over-leveraging of recent years, a financially stronger U.S. consumer implies only good things for the longer-term


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Consumers Cherry Pick Black Friday Sales

Consumers Cherry Pick Black Friday Sales

Courtesy of Michael Panzner at Financial Armageddon

Nrfblackfriday 
The good news, according to the National Retail Federation, is that 195 million U.S. shoppers visited stores and websites this past weekend, an impressive 13% jump over last year.

The bad news: average spending fell nearly 8% to $343.31 per person, the lowest level in four years, while overall sales were up only 0.5% versus last year’s total.

In sum, it looks like a lot more people came out to cherry pick the biggest bargains — but not much else. That doesn’t seem to be a particularly encouraging sign, especially for retailers’ margins.

Brown shoots, anyone?

 


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Early Reports Point Toward A Nationwide Black Friday Shopping Frenzy

Early Reports Point Toward A Nationwide Black Friday Shopping Frenzy

Courtesy of John Carney of Clusterstock

Black Friday Shopping Line Led By Guy In Cowboy HatIf local media reports are accurate, shoppers have turned out in huge numbers across the country for Black Friday.

We did a survey of local news sites to gather the latest Black Frdiay news. And it looks very good for retailers.

Cincinnati, Ohio: "A long line of shoppers looking for the best priced toys for Christmas waited outside a Western Hills Toys R’ Us store on Glenway Avenue, since late Thursday night to be among the first in line. After the doors opened at 12 a.m., there were some reports that Cincinnati police had to be called to bring order to a disorderly line of shoppers. Some of them said an argument between several groups of shoppers got out of hand and forced the police to called for help…At the new Wal-Mart superstore in Fairfax on Red Bank Road, over a thousand people came early Friday morning, to be in the right line to get some of the doorbuster sales the chain was offering…Many retailers warn that they have severely cut back on what they have ordered."

Weston, Wisconsin: "The line leading to Target in Weston stretched at least three blocks as people got ready for Black Friday shopping Friday."
 
Framingham, Massachusetts: "Dondrae May, a manager at Best Buy’s Framingham, Mass., store, said shoppers started lining up at 4 p.m. Thursday for the 5 a.m. opening for the limited early morning specials like the $299 32-inch Dynex flat-panel TV.

He noted that crowds were larger than last year and that shoppers were filling their basket with more items than a year ago, when they were shellshocked following the ballooning of the financial meltdown. The biggest draws were laptops, TVs and GPS systems, he said."

Aurora, Illinois: "Black Friday shoppers got an early start this year, causing a 2-mile traffic back-up near Chicago Premium Outlets in Aurora…Starting about 11 p.m. Thursday, cars began lining up to get into the mall, according to Illinois State Police…The mall opened at midnight, and the heavy traffic remained for several hours, State Police said."

Somewhere In Middle Georgia: "400 early birds waited in the dark for Belk to open this morning at 4:00 am.

"There


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Phil's Favorites

What kind of Brexit will Britain now 'get done' after Boris Johnson's thumping election win?

 

What kind of Brexit will Britain now ‘get done’ after Boris Johnson’s thumping election win?

Courtesy of Tom Quinn, University of Essex

The Conservatives’ victory in the UK general election is at once a decisive moment of clarity and a harbinger of uncertainty. Prime Minister Boris Johnson called the election with a pledge to “get Brexit done”, and with his newly-won parliamentary majority, he is now in a position to do just that.

The shape of Brexit has already been defined by the withdrawal agreement Johnson negotiated with the EU in October. It en...



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Chart School

Funds are getting ready to move out of USA

Courtesy of Read the Ticker

Just before the hang over in the US equity markets, money will move and take their well earned gains else where. Here is why.

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Charts in video.

US is in the late cycle boom.

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US stock market with the US dollar, they have risen together from 2012. A change of this will force money to move.


Cli...



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Zero Hedge

Pay Attention: Robots Are Killing The Millennial Worker

Courtesy of ZeroHedge View original post here.

There is no doubt that a wave of automation is about to be unleashed on economies worldwide. 

In fact, the impact of automation on the labor market has become more of a political issue now than it ever has, with its impact on the labor force being cited as one of the main causes for the election of leaders like U.S. President Donal...



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Kimble Charting Solutions

Euro Breakout In Play? Gold Bulls Sure Hope So!

Courtesy of Chris Kimble

The Euro has spent much of the past 2 years trading in a down-trend.

Though precious metals like Gold have fared well, this has been a bit of a headwind because it means that the US Dollar has remained firm.

Big Test In Play for the Euro

The Euro is testing a confluence of important support just as the downtrend is narrowing and ready for a “break”. That support includes lower falling wedge support and the Euro’s long term up-trend support line (see points 1 and 2).

If the Euro can succeed in breaking out at (3), it would be bullis...



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Insider Scoop

8 Healthcare Stocks Moving In Friday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Sarepta Therapeutics, Inc. (NASDAQ: SRPT) stock surged 36.4% to $137.00 during Friday's pre-market session. The market value of their outstanding shares is at $6.1 billion. The most recent rating by Janney Capital, on December 13, is at Buy, with a price target of $175.00.
  • GlaxoSmithKline, Inc. (NYSE: GSK) shares surged 1.1% to $46.44. The market value of their outstanding shares is at $112.9 billion. According to the most recent rating by UBS, on November 21, the current rating is at Buy.
  • AstraZeneca, Inc. (NYSE: ...


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Digital Currencies

Three Men Arrested In NJ For Running Alleged $722 Million Crypto Ponzi Scheme

Courtesy of ZeroHedge View original post here.

Authored by Kollen Post via CoinTelegraph.com,

United States authorities in New Jersey have announced the arrest of three men who are accused of defrauding investors of over $722 million as part of alleged crypto ponzie scheme BitClub Network, per a Dec. 10 announcement from the Dep...



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Members' Corner

Tobin Smith: Foxocracy, the 2020 Election, and the Stock Market

 

For decades, Fox News has been spreading false information and hooking its audience into an angry, xenophobic and paranoid worldview. It's no mystery that Fox was instrumental in the 2016 election -- but how did it do it? Tobin Smith, CEO of Transformity Research, Inc. and former Fox News contributor and talk show host, explores this phenomenon and discusses Fox News’ emotionally predatory and partisan propaganda media strategies...



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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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