Monday, December 1, 2008

Black Friday Sales

The preliminary sales figure for retail sales on Black Friday were announced at 3% above last year's figure, which is anemic to say the least. How much an an increase in gross sales is really insignificant though, the numbers that matter are the margins. It appears that the increase in gross receipts was a function of deeply discounted prices coupled with advertising blitzes. If retailers are dumping inventory at just above or in some cases below cost the gross sales are not really indicative of the reality of the dismal retail season that is about to happen. Most retailers count on December Sales to turn their books from red to black even in the best of years, however, this year is far below even the worst retail sales in decades so nothing but a record breaking shopping season will be able to accomplish the balance sheet color change, and that is very unlikely to happen.

With consumers coming out of a period where energy costs ate away most of the discretionary money that would have been spent on holiday shopping, any real increase in holiday spending seems at best to be a hopeful wish. American consumers are carrying a record 14 trillion dollars in credit card debt, they have seen their home values fall by as much as 30%, and their savings and retirement funds halved it would take a miracle to have anywhere near the level of retail spending needed to revive the retail sector. Those with any kind of discretionary money still available will find super bargains as the end of the holiday shopping season winds to a close. Retailers must dispose of inventory and raise cash if they have any hope of surviving into the spring. Many retailers will not survive the 2008 sinking ship, they will drown in bills and collection proceedings that will force the largest Bankruptcy Case load that the United States Federal Courts have ever seen.

In early 2009 the industry that will see the largest employment growth will be the Federal Bankruptcy Courts and the ancillary services that are affected by Bankruptcy filings. Although jobs will be created by the Bankruptcy Industry it will be overshadowed by the sheer numbers of those joining the unemployment ranks from the closed retail businesses which will cause more layoffs in restaurants and food service establishments that cater to the retail worker lunch needs. We have heard much about the devastation that the failure of financial institions would have on the general economy while nothing was done to prop up the vital reatail economy which employs massive amounts of people and pays rent on trillions upon trillions of square footage in malls, strip malls and shopping plazas. The lack of rent being paid will decimate the Commercial Property Industry and lead to more bankruptcy filings in this industry and trillions of dollars in defaulted commercial mortgages which leads us back to our friends at the banks who undoubtedly will be begging for more bailout money as the rest of the economy sells off assets to survive.

This leads us to the most important question that has not been asked since the financial failures and bailouts began, "why are the banks, insurance companies and financial institution not selling their assets to survive". The average family and retail business that begins to struggle are forced to sell assets in order to fulfill their financial obligations. Many family owned businesses forgo salary in order to maintain their business in hopes that a turn around is near until they have no assets left to sell. Yet, the banks, insurance and financial companies go to the Government with hat in hand and return with billions of dollars to their posh offices with designer furniture and expensive decor without selling their assets or forgoing their salaries. They return to their offices with their check books filled with the largess of the Federal Government to continue their lives of conspicuous consumption funded by multi-million dollar salaries from businesses that failed under their leadership.

The Obama Administration will have a full plate to deal with on January 20th, 2009, it is an impossible mission for anyone to repair the damage that was allowed to occur over the last eight years without addressing the root of the problem. American policies made it economically feasible to service America's needs with outsourced foreign labor and substandard wages. There were not even any mandates or conditions with the bailout money to force companies to repatriate the tens of thousands of service jobs sent over seas by the Financial Industry. If the Government is going to continue to hand over the wealth of our Nation to the Companies that have already robbed us once shouldn't they at least be forced to spend the money on pay checks for American workersa so that some money can be put back into the American Reatil Industry?

Add to Google

No comments: