5 signs pointing to a tight Christmas

A host of disturbing news about consumers is cropping up, and it could mean fewer presents under trees this year.

By InvestorPlace Nov 3, 2011 9:28AM

By Jeff Reeves, InvestorPlace.com

 

The consumer front hasn't seen many encouraging signs in the past year or so. The big issues remain unresolved: Unemployment is persistently high, housing markets remain battered, and there's a general fear of more hard times to come.

 

Most investors have become immune to a lot of these major trends, adjusting their expectations to a "new normal" in which the benchmark is significantly less impressive than in previous years. However, just because you've set the bar lower doesn't mean consumers will easily jump over it. A host of disturbing headlines about consumers have cropped up recently, and they could foretell that a rather bleak holiday shopping season.


Wages and income are still flat
. For starters, it's worth admitting the news hasn't all been bad on the spending front. Take the recent GDP report's somewhat cheerful details, thanks to consumers. However, the most important trend here isn't a brief and modest uptick in spending but the utter lack of increase in any real wealth for consumers.

 

Consider that disposable income ticked up a mere 0.1% in September, according to the Commerce Department, even though spending increased 0.6% to generate a bit of economic growth. That trend is simply unsustainable.

 

Separately, real hourly wages fell 0.1% in September from August. In short, consumers aren't making any more money. They may have spent more last month than in previous periods, but unless they also start bringing home bigger paychecks don't expect more spending growth.

Retailers are seeing little organic growth. Generally speaking, retail stocks haven't had a very impressive year, and it's logical to assume that trend will continue in the fourth quarter as well. Specialty retailer Gap Inc. (GPS) is tracking less than a 1% increase in revenue for this fiscal year and looking at a mere 2.5% increase in fiscal 2013, according to Wall Street estimates.

 

Department store leader Macy's (M) is forecast for a meager 5% gain in fiscal 2012 revenue growth and 3% in fiscal 2013. Discounter Walmart (WMT) is projected to see revenue growth of 5% in fiscal 2012 and 5% again in 2013. The list goes on, and it's rather uninspiring.


Big-ticket TVs aren't selling
. If you want to get the pulse of consumer electronics, just look at Japanese stocks. Companies catapulted to dominance on the strength of  spending in the U.S. are now suffering big headaches — especially from the king of American home appliances, the TV.

 

Take Sony (SNE), which is projected to post yet another huge loss in its TV division. On Monday, Panasonic (PC) also announced ugly numbers, thanks to its money-losing TV business. In response, its Viera branded sets will see some consolidation.

 

The reason is that demand is weak, and margins are squeezed razor-thin as manufacturers court shoppers with low prices. People may be giving plenty of gifts this holiday season, but judging from this trend in TVs, they won't be giving many pricey electronics items.

Seasonal hiring is flat. As projected in an earlier column that took an in-depth look at the lack of seasonal hiring, it appears that the holidays aren't going to be kind to temporary workers. FedEx (FDX) and its 20,000 jobs notwithstanding, seasonal job gains in the retail sector will be flat at best, according to consulting firm Challenger Gray & Christmas — and possibly even lower than the 627,600 holiday positions added last year.

 

Some say this is an effort to juice profits by doing more sales with less staff. However, anyone who has visited a crowded retail store during the holidays knows full well that a lack of adequate staffing can hurt a store by driving customers away or missing sales that could help increase margins.


The economy, stupid
. Even if these data points weren't staring us in the face, it remains crystal clear that economic and political uncertainty in the U.S. — as well as in the euro zone (Greece) and in the Middle East ("Arab Spring") — aren't going away. It simply is irrational to expect that shoppers are going to ignore the volatility on Wall Street, the battered housing market, the lack of new jobs and the caustic political environment in Washington.

 

Christmas might be the time of year when people try to be more generous and focus on what's really important in life. But it's a little naïve to think that mere holiday cheer can erase the doubt and uncertainty that is so pervasive this winter.


Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.

 

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55Comments
Nov 3, 2011 2:54PM
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Getting less presents doesn't mean a thing.  Why can't people be happy having time off and relaxing with people they enjoy.  Big flipping deal if you don't get a new phone or some crap that just doesn't matter!!  Smile  

Nov 3, 2011 4:55PM
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Five signs to a tight Christmas.

1. Have not had a raise in 4-plus years.

2. My health insurance has quadrupled.

3. The price of Gasoline is up up and up!

4. At the Grocery store $50 fills 2-small plastic bags. Remember $50 used to fill 4-paper  

     bags.

5.Taxes, Taxes, Taxes (need i say more) Okay, TAXES!

 

I could go on but the heading read 5-signs to a tight Christmas

 

Nov 3, 2011 2:46PM
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I am sick at heart at the thought of Christmas. I lost my job two years ago, at age 62, and was forced to take my Social Security four years earlier than I intended...thereby losing approximately $380 in income from it, had I been able to work until age 66. Now, an additional $115 is out the window to pay the MediCare premium, since I turn 65 this month. NJ MedicAid will not subsidize because my income is $5.75 a month above the maximum. Yet, people who have lived on welfare for their entire lives get free medical coverage. I worked for 45 years and have gotten a slap in the face for it. I am used to being generous at Christmas...this year is going to be pathetic and it really bothers me to not be able to give what I used to give.
Nov 3, 2011 2:44PM
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Gee, fewer presents under the tree. Big effing deal.  Remember, Christmas is not supposed to be about presents and commercialization.  So it's about time we find the morals this country lost long ago and appreciate what matters most...family, friends and thy fellow man.
Nov 3, 2011 2:29PM
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Please keep gas/food prices higher too. That will almost guarantee stagnant retail spending. 
Nov 3, 2011 3:41PM
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In 2009 I was laid off from my sales job. This could be my third Christmas with out a job. Divorced several years ago. I hope and pray that things get better before the year ends.

With limited funds I will not be able to give out presents this year.

 

P.S. My home is on the market  for sale but the best part is that I have great friends and I have good health.

 

Good luck to all the unemployed for the Holiday season.

Nov 3, 2011 3:47PM
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Are these companies crying again.  Again they basterdtised Christmas and the rest of the holidays that go along with it.

 

If you want people to buy more then YOU need to put people to work. YOU need to bring back the jobs that you sent over seas. People don't have jobs. No jobs no money to spend.

 

Hey Nabisco. Get back the jobs that you sent to Mexico. I for one will not ever buy or eat any of your products until you bring the jobs back. You are UN-AMERICAN in my eyes. The same for all of the other Co. that have done the same.

Nov 3, 2011 12:21PM
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MERRY CHRISTMAS from Washington, D.C.. 

 

Would you please give us more money (taxes) this year?  We have more shovel ready projects to waste your hard earned dollars on!

Nov 3, 2011 3:11PM
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 Wow,so many comments about Christmas not going to be good.
Yes, we have plenty to celebrate! Family, loved ones, friends (the real ones), and most of all Jesus Christ. He is reason for Christmas. Everyone is so caught up with worrying about the material things, they are forgetting what the meaning of Christmas is about.

Nov 3, 2011 5:08PM
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My theory is that when you strip out all the things around us that debt bought (personal and Governmental) you will see something closer to reality.

I knew middle class families in the 1960's. Their homes were smaller (I'm in one right now), and they had less new stuff like cars and electronics. That was at the heigth of the US economy.

And those were happy times. Times have changed.

We simply became addicted to material things that we couldn't afford. We got way into debt over luxuries.

I know it's a bitter pill to swallow, but we really have only ourselves to blame.

I hope we all can have a better, more productive new year. This is still the greatest country in the world. (And I have travelled and seen how the rest of it lives).

Best of luck to you all. Don't get lost on thoughts of what you don't have, or what someone else has - focus on the good things you do have. Family, friends - even those little friends (pets).

Nov 3, 2011 3:19PM
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I agree with the idea that less presents is a good thing. Spending time with family is more important anyhow. Plus, less presents means there will be less spoiled brats being created because they are upset at how many presents they get as opposed to being thankful they get any at all. Sometimes less is more. When it comes to material goods this is certainly the case.
Nov 3, 2011 3:23PM
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Let's go one step better. Don't look at your family and give them things they don't need. Listen to them and see if they give clues to what they REALLY want. Pray you can afford it.

 

One step higher than that is find someone who has nothing and give them clothing or food.

 

Christmas isn't about what we can get, it's what we can give to someone who truly has a need.

Nov 3, 2011 3:27PM
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If you can bake cookies, or any other foods, adopt the first responders in your town. Military bases? Our soldiers, sailors and marines have sweet teeth, too. Emergency rooms. Fire stations. Find someone who protects or saves us and treat them to some good food.

 

Thank them and if they served overseas, welcome them home.

Nov 3, 2011 3:11PM
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I won't be spending a single dime on Christmas presents or other holiday-related expenses this year.  No gifts, no greeting cards, no pricey meals out in restaurants...  NOTHING.  My wallet is closed for the season.  The retailers will just have to get by without me.  I'm not playing the game anymore.
Nov 3, 2011 2:50PM
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If people would get rid of bad debt (any debt besides Mortgage, Education and automotive) and even reduce good debt (i use "good" loosely) they would pay less in finance and interest charges thus having more money to build up an emergency fund.  Once the emergency fund is produced and after reasonable retirement contributions are made, there will be money to spend on consumer goods again(just pay as u go, no credit that isn't paid off each month)

 

If you don't make enough to do the above, you either need to reduce your standard of living or increase you income (better yet both).  Maybe share a house or apartment for awhile, learn to use public transportation(and ditch the car) or get a part time job.  You don't have to do it forever , just til you get rid of the debt and build a rainy day fund.  Have a plan on where you want to be and how to get there. Set short term, medium and long term goals and establish measurements and dates to see if its working.  AND set goals for after you succeed so that you continue to build and not slide back into old habits once the clouds clear

 

Nothing is more relaxing, calming, securing and happy as having no debt, money in the bank and a well planned future.  NOTHING YOU CAN BUY WILL EVER BRING THAT PEACE OF MIND

Nov 3, 2011 3:13PM
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We decided as a family not to support commercialization this holiday. Our kids are either grown or teenagers and we are having a vintage Christmas. We will give used stuff to each other. Recycle, reuse and keep what little money we have in our pocket! The meaning of Christmas has been lost for so long, it is about being together as a family and that is exactly what we intend to do.

Nov 3, 2011 3:21PM
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If you can't "give" (meaning material things) as much as you used to, just state that to you friends and relatives.  Are they going to complain?  If they do, you've learned a great deal about their character.  Christmas is way better without all the junk. Get a tiny Charlie Brown tree, bake some cookies, go to a candle light service, and feel the love!!!
Nov 3, 2011 4:40PM
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Jobs are up because of extra xmas help! they will be gone come mid January. department stores, UPS, FED-EX. These are all temp jobs. Yes spending was up! Early Xmas shopping, school supplies.

 

I do not know whom these people are trying to fool. They just tell us what we want to hear. Things really do not look very good out there, I'M SCARED!!!!!

Nov 3, 2011 3:30PM
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Christmas is about the birth of Jesus.  It is a Roman Catholic celebration that has been exploited and bastardized by the media.  The ultimate irony of all of this is that people of different religions just think it's Santa Claus day, and they all take part in this big, fake, chaotic commercial debacle, and have no reason nor knowledge of history of why any of this is even happening.  It's just one of America's "celebrations of winter" time, and everyone is entitled to partake in this. Yet, those are the same people that try to ban "In God We Trust" on the dollar bill, and try to ban "One nation under God" because it "segregates" or is "politically incorrect".  This country is so contradictory in their beliefs that the beliefs this country was founded on are now gone.  This country no longer has an identity of integrity.  This country's identity is greed.    
Nov 3, 2011 5:55PM
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Times are tough and we are going to have to face that fact no matter what time of year it is!!!! MAYBE THE REASON FOR THE SEASON WILL BE PUT ON THE FRONT BURNER INSTEAD OF THE BACK BURNER LIKE IN OTHER YEARS.  The birth of our Lord should be number one and our families a close second during this or any ohter time of year and Not bragging about how great your present is? Maybe your love for that person should be greater than the size of your wallet? just saying---Everything that glitters is not gold!
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