Spring Hasn't Sprung for Retail

The ice may be melting with spring in the air, but retailers are still frozen in holiday hell.

In a typical year, the change of seasons and the celebration of Easter entice consumers to spend a little more frivolously. Things are different this year.

Like the previous holiday shopping season, consumers are holding back on the usual special treats associated with Easter. Spending on flowers, candy, gifts, clothing and even the festive dinner is expected to fall. Overall, the National Retail Federation (NRF) anticipates a 13.6% decline in total spending for the average American.

The significance of Easter spending for retailers cannot compare to the make-or-break November through December period. However, spending levels during holidays do indicate consumers' willingness to spread some green around. When consumers are so cash-strapped that they are reluctant to splurge for a holiday celebration, it is an indication that they're likely to be extra-thrifty on an everyday basis.

According to a recent NRF survey, here's what to expect from consumers as we kick off the spring season:

  • 64% of people will hunt for bargains -- not eggs -- at places such as Big Lots (NYSE: BIG  ) , Family Dollar, and other fellow discounters. That's up a notable amount from last year's 58.8%.
  • Roughly a third of surveyed people indicated they still plan to shop at their favorite department stores, such as Macy's (NYSE: M  ) and Saks (NYSE: SKS  ) .
  • Online outlets Amazon (Nasdaq: AMZN  ) and Overstock (Nasdaq: OSTK  ) will see some holiday traffic, with 11.4% of surveyed shoppers planning to make cyberspace purchases.
  • Just 5.9% said they plan to buy Easter apparel from a specialty store. That follows the string of spending cutbacks that American Eagle (NYSE: AEO  ) and Abercrombie & Fitch have been facing from their target consumers for many months.

I've noted before that recovery in the retail industry will likely trail the rest of the economy. Expectations that retail outlets will profit from full-priced spring merchandise in a major holiday appear overly optimistic, especially since those firms have faced hardship throughout the recession. As we learned three months ago, holiday cheer can be spread without a great deal of consumer spending.

Even a basket chock-full of sweet and gooey candy can't mask the bitterness that retailers are tasting these days.

For further Foolishness:

Fool contributor Kristin Graham owns shares of American Eagle. The Fool has a disclosure policy. Amazon is a Stock Advisor selection.


Read/Post Comments (4) | Recommend This Article (8)

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  • Report this Comment On April 02, 2009, at 2:48 PM, imalost wrote:

    Is that why Amazon PE is over 50 because their sales, not profits are going to increase 11%. A little bit overvalued t seems. What a joke.

  • Report this Comment On April 02, 2009, at 2:54 PM, imalost wrote:

    Amazon's PE hit 52 today wow, do you think their earnings are going to grow at that pace. The analyst surveyed say negative 1% growth in 2009. I guess that PE is cheap for that kind of growth considering there is going to be a lot of new entrants to compete with the Kindle which will add 1 cent to the bottom line. This is a scam stock.

  • Report this Comment On April 02, 2009, at 4:35 PM, Melaschasm wrote:

    Retail may not have a spring in its steps, but food retail is doing okay as some consumers switch from eating out to eating in.

    Regarding Amazon specifically a P/E of 50 may be high for them, but they are gaining market share, which could bring a very nice increase in profits after the economy recovers. While I am not a bull on retail right now, to the extent that I want some exposer to the retail market, Amazon, Walmart, and Costco are my personal favorites.

  • Report this Comment On April 03, 2009, at 11:24 AM, imalost wrote:

    Sure go ahead buy a retailer at 50 PE PEG of 2.5 as the economy deteriorates even more and unemployment increases. Wla-Mart and Costco are ok, but to pay this multiple for any company is ludicrous. If and when the economy recovers Amazon may do better, but there is no way to justify metrics so high for a retailer. How much upside can it have? Wal-Marts PE is less than 16 and Costco less than 18.

    There is no way to justify that Amazon should be 3 to 4 times more expensive. Its is a stock that trades on hype and constant PR not metrics.

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