This holiday could kill retail's weakest links

A lackluster improvement in the industry means that at-risk retailers will not be part of boats in a rising tide.

By 247 Wall St. Oct 3, 2013 1:08PM

Image: Young woman clothes shopping (© Image Source/Getty Images)By Douglas A. McIntyre, 24/7 Wall St.

 

The National Retail Federation (NRF) reports that the industry should post a 3.9% increase in sales to $602.1 billion.


On its face, the number looks good. However, if the forecast for November and December activity within the sector turns out to be correct, the weakest companies are unlikely to recover, perhaps at all.

 

The 3.9% improvement is misleading, because online sales, which make up an ever larger portion of overall activity, are forecast to grow by 13% to 15%, rising to as much as $97 billion.


This part of the data indicates how much of a challenge e-commerce has become to the traditional store model. In particularly, it supports the belief that Amazon.com (AMZN) will continue to grow at an impressive pace, at the cost of the aging physical store model. Additionally, weak retailers rarely have strong Internet sales, which puts them at another disadvantage within the industry.

 

The public corporations that are at severe risk are no different than those at risk at the start of the year -- J.C. Penney (JCP) and Kmart and Sears, which are part of Sears Holdings Corp. (SHLD). The only change is that a lackluster improvement in the industry means they will not be part of boats in a rising tide.

 

The situation for these retailers could become even more perilous, if the current shutdown of the federal government continues for a lengthy period. NRF Chief Economist Jack Kleinhenz remarked:

 

The economy continues to expand, albeit at an unspectacular pace. In order for consumers to turn out this holiday season, we need to see steady improvements in income and job growth, as well as an agreement from Washington that puts the economic recovery first. Our forecast leaves room for improvement, while at the same time provides a very realistic look at the state of the American consumer and their confidence in our economy.

 

The "Washington" part of the forecast becomes more troublesome every day, which means that retail sales across America actually could fall.

 

The retail industry is really no different from most others. Car sales improvements tend to help most companies in the sector. So do IT sales and media revenues. Public corporation retailers with sales that have fallen for several quarters will find that the pathetic activity within their sector will not help them -- at all.

 

More from 24/7 Wall St.


1Comment
Oct 3, 2013 2:40PM
avatar
Honestly... in light of total sector failure, what "retailer" is really breaking from the mold and moldy? G-strings for toddlers? Grandma shops the Men's Department for something that is comparable to her figure. Every woman's wardrobe is filled with booty styles but nothing truly fashion-worthy or for gaining respectability when the situation calls for it. We STILL make our clothing overseas instead of here and worse-- overseas are metric nations putting American size tags on what they make. 
Can we get RID of those who dominate this stupidity and free the industry up to passion in design instead of greedy grubbing money? 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

105
105 rated 1
271
271 rated 2
420
420 rated 3
633
633 rated 4
492
492 rated 5
532
532 rated 6
725
725 rated 7
515
515 rated 8
343
343 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
SWNSOUTHWESTERN ENERGY COMPANY10
TAT&T Inc9
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.