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Saturday, December 26, 2009

Depending


Depending on which retail figures you use, this year's same store retail sales were either decent or down.

ICSC has been the more positive, and this is their reporting for the week ended the 22nd.

Overall the pattern has been that lower-end stores have done considerably better, but higher-end chains are still taking a beating, with the possible exception of stores catering to teens and young adults.

A Bloomberg article sums up the confusion:
The Washington-based National Retail Federation was holding to its forecast for a 1 percent drop in holiday sales, Ellen Davis, a spokeswoman, said Dec. 20. The International Council of Shopping Centers reiterated on Dec. 22 its forecast for a 2 percent increase in sales at stores open at least a year in December, after reporting that the storm slowed growth to 0.4 percent year over year in the week ended Dec. 19.
Oh well.

The ICSC consumer survey was quite interesting this year. Clothing inventories were indeed very low, but I don't see the sales as pulling inventories down sharply at most chains. Unless this breaks soon, one would expect more store closures.

In fairness, here is the National Retail Federation's Holiday page. Their Dec 16th survey cracked me up. It begins by darkly noting that shoppers are procrastinating, and includes an analysis of credit buying:
“As expected, shoppers have shown tremendous restraint in buying gifts with the money they already have, not the money they hope to have,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “Relying less on credit for holiday purchases will help consumers feel more comfortable about their personal finances again and may make them more willing to spend in the future.”
I don't suppose 20+ credit card interest rates have anything to do with it? There are many older people who are not likely to have additional money in the future and have effectively had their credit cut off, so I wouldn't be holding my breath. It's time to figure out how to make a profit in this environment.

Consumers have been cutting revolving credit since Q3 08 - that's a year and a half now (see G.19). A lot of what they're doing is simply defaulting; perhaps retailers' hopes would be best pinned on a whole lot of consumer bankruptcies.

I plan to post later on why I don't think credit card debt IS coming back. I don't think most consumers will ever again be able to use these cards as a funding method (rather than a payment method) under current legislation. This year's credit card legislation did some needed things, but it also was completely mistaken in forbidding rate raises absent default. There is no possible way that creditors (including stores) can carry portfolios of any cards other than high-rate or gold-quality. I can't see how stores could get away with carrying gold quality either under the new rules.

Comments:
Merry Christmas, MOM. Could you elaborate a bit? What is "gold quality?"
 
MOM,

“Relying less on credit for holiday purchases will help consumers feel more comfortable about their personal finances again and may make them more willing to spend in the future.”

That's an amazing amount of optimism. Like you, there's a sarcasm gene firing off on all cylinders as I read it. I'm game.

"The entire amount of credit on one consumer's credit card is nothing compared to the power of the force (of funding his/her retirement in an environment that has seen most investments trade sideways at best for a decade and unemployment skyrocket)." - Darth Economist, Credit Wars Episode IV: A New Hope (2010)
 
Mark - I'd describe my reaction less as sarcasm than skepticism, but the ol' incredulity bone is definitely twinging.

It used to be that a lot of banks could predict Christmas sales by watching their Christmas Club accounts; when the account balances were low Christmas spending would be restrained. I am suggesting that we are moving back to that as a result of the recent credit card legislation.
 
Gordon - and Happy New Year!

Gold quality CC debt is credit extended to entities that have substantial assets I can pursue legally in case of default. CC debt is unsecured, but it is legal debt and can be collected through collection and BK IF the entity has the assets. For individuals, obviously this excludes equity in primary residence & retirement accounts.

There are tons of people out there with 700 plus credit ratings who are essentially judgment proof. They are not gold quality CC debt. Gold quality CC debt could be a person with a 660 credit rating and assets I can collect from in case of default.
 
MoM My experience in collections confirms what you say about "Gold" quality accounts,although it is surprising what people can do if properly motivated.And a Happy New Year to all!
 
Speaking of gold quality CC debt...

I was listening to "Handel on the Law" this afternoon for a few minutes on the radio.

A woman called in and wanted to know what's going to happen to her. She took on $30k to $40k of credit card debt to help her relatives who were struggling.

He asked her about her situation. She said she's retired and her only income is Social Security. She's also a renter.

He asked her when her last payment was made. She's said that it had been three years and they keep changing collection agencies.

He told her to explain her financial situation to the collection agency. He also told her she was safe. There simply wasn't anything they could do. There are no debtors prisons in America and they couldn't get her Social Security money.

In other words (my words), they can't squeeze blood out of a turnip.
 
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