http://zachstocks.com/2009/08/retail-data-fails-to-inspire/ Dynamic Investments for Exceptional Traders Tue, 31 Jan 2012 01:21:02 -0700 http://wordpress.org/?v=2.8.6 hourly 1 http://zachstocks.com/2009/08/retail-data-fails-to-inspire/comment-page-1/#comment-7686 Ted Hurlbut Thu, 13 Aug 2009 22:55:40 +0000 http://zachstocks.com/?p=2054#comment-7686 Retailers have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. Retailers can only report earnings growth so long on cost cutting. There's only so much room in the margins for all the discounting. At some point, soon most likely, retailers are going to have to be able to report top line growth to sustain earnings. at this point, I wouldn't count on the consumer cooperating. Retailers have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can’t generate units. They can’t move the top line, margins remain under pressure, and earnings continue to be driven by cost cutting. It’s not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response. Retailers can only report earnings growth so long on cost cutting. There’s only so much room in the margins for all the discounting. At some point, soon most likely, retailers are going to have to be able to report top line growth to sustain earnings. at this point, I wouldn’t count on the consumer cooperating.

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