Executive Briefings

Retailers Reeling as Consumers Hold on to Their Cash

The unthinkable has happened. American consumers are losing their urge to shop. Maybe it is because they have been scared into prudence, maybe it is because they can no longer get the credit to which they have long been addicted, but they are spending less. Every single retailer is hurting from the drop in demand, but the weakest are in grave trouble. Some, already struggling in an intensely competitive retailing market, are in free-fall, possibly even heading for bankruptcy. For their stronger competitors, that makes the present such an unmissable opportunity.
Which is why shares in Wal-Mart are worth more than at any time in 2006-07, even though they are down by almost a fifth from their high in September. Target, a struggling rival, by contrast, has seen its share price drop by nearly half since September to it's lowest in four years. The stock market value of Sears, another famous name, is little more than one-quarter of what it was in April last year. Shares in Whole Foods Market, an upmarket organic food retailer nicknamed "whole paycheck market", are down by nearly 80 percent from their highest level, and at their lowest since 2001. Similarly, shares in Best Buy have tumbled, but the electronics retailer is in a bullish mood. It expects to expand its market share if a competitor, Circuit City, eventually goes bust.
Source: The Economist

The unthinkable has happened. American consumers are losing their urge to shop. Maybe it is because they have been scared into prudence, maybe it is because they can no longer get the credit to which they have long been addicted, but they are spending less. Every single retailer is hurting from the drop in demand, but the weakest are in grave trouble. Some, already struggling in an intensely competitive retailing market, are in free-fall, possibly even heading for bankruptcy. For their stronger competitors, that makes the present such an unmissable opportunity.
Which is why shares in Wal-Mart are worth more than at any time in 2006-07, even though they are down by almost a fifth from their high in September. Target, a struggling rival, by contrast, has seen its share price drop by nearly half since September to it's lowest in four years. The stock market value of Sears, another famous name, is little more than one-quarter of what it was in April last year. Shares in Whole Foods Market, an upmarket organic food retailer nicknamed "whole paycheck market", are down by nearly 80 percent from their highest level, and at their lowest since 2001. Similarly, shares in Best Buy have tumbled, but the electronics retailer is in a bullish mood. It expects to expand its market share if a competitor, Circuit City, eventually goes bust.
Source: The Economist