Monday, December 01, 2008

Black, and Blue, Friday: Landfill Scavangers at Saks

Much will be written about “Black Friday”—the busiest shopping day of the year, when most retailers start to coin money—and in fact much already has been written.

So we’re not going to blather about the numbers here, which look “better than feared,” to quote the most over-used phrase we’ve seen in the press all weekend.

But having watched the retail business for more than a couple of business cycles, we’ll offer what we saw happening. And what we saw was a continuation of the Great Leverage Unwind.

Now, for starters, it is extremely dangerous, investment research-wise, to walk into a store and ask the nearest clerk “How’s business?”

Most likely you’re talking to an hourly employee who's been working at the place less than a year. As such, they don’t think in terms of “year over year same-store sales.” They think in terms of “today” versus “yesterday.” Or even “now” versus “this morning.”

So chances are they’ll tell you things are really busy if they happen to be really busy at the moment; and really slow if they happen to be really slow.

Also, a store can be packed or not based on the time of day, or the day of the week, not to mention its proximity to the holidays, as well as whatever the regional economy is doing.

But by visiting the same stores at the same time of day at the same time of year, you can take the pulse of what’s happening to a reasonable degree.

And the pulse we took over the weekend was like nothing in years.

Saks—the Fifth Avenue Saks—looked like Filene’s Basement the day before Thanksgiving, with 30-40-50% off signs everywhere, and women rifling through stacks of relatively inexpensive scarves and other accessories with the hunted look of landfill scavengers.

Indeed, all New York City seemed to be on sale—and full of shoppers looking for a sale. Our old pal Mustafa—we used to have breakfast at his place every morning—said the restaurant business has been horrible. He motioned out the window at the crowds standing by the Rockefeller Center skating rink: “Look, nobody there!”

And indeed the crowds did look thin.

This is no doubt due to the rising dollar—and falling world stock markets. Unlike years past, we heard fewer accents on the streets of New York City, particularly Eastern European voices. And this is killing high-end retail.

One extremely upscale store that’s been packing ‘em in the last few Bubble years was so empty on Saturday afternoon you could have shot the proverbial cannon through it and not hit a customer, although you would have taken out plenty of “For Sale” signs.

The place felt like a Tuesday morning in June, not the day after Black Friday.

Moving to another side of the country, we found that the airports, too, were dead. And not just on the inside, but on the outside, too: we had a hard time driving out of the Hertz rental lot in San Francisco owing to an unusually high number of cars parked everywhere.

Where’d the customers all go? Simple, they traded down. So it was Black Friday for some retailers, but quite Blue for others.

The Great Unwind continues.

Jeff Matthews
I Am Not Making This Up

© 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.


Annie and Lyon Jewett said...

The last two nickles I had to rub together fell through the hole in the pocket of my last pair of pants.....

Anonymous said...

Out here in oil country, everyone hears and sees the news, but we wonder what on earth all the hubub is about.

The traffic has doubled and we have the lowest unemployment rate in the civilized world. Consequently, some less eligible candidates have risen to retail positions, and believe me, its a iffy proposition to attempt to obtain a burger with no pickles in these parts, unless you go online. I mention this because the fast-food (which is neither) joints are crammed. This is a dispensible expense in a town this size. You can go HOME for lunch. It takes 10 minutes.

With that said, the mall is utterly crammed. Car dealerships have moved IN. BMW dealerships.

My God, how the money rolls in. In this environment, we see the smoke and hear the explosions, and occasionally see an ambulance race by, but never really feel the war. I realize that deflation will eventually sideline the high-rollers, but thus far, they're drunk and buying.

We are not the only late-cyclical economy that's going gangbusters. There must be others out there. Any chance of figuring out where they are? Look for who is scrambling for janitors?


Anonymous said...

"So it was Black Friday for some retailers, but quite Blue for others."

Don't tell that to Wal-Mart (NYSE: WMT), although the company suffered from some blues of its own making last Friday when one of its employees got trampled on by unruly shoppers. Talk about killing the holiday spirit (no pun intended)!

smithycroftman said...

Great points Jeff, I was in NYC this Thanksgiving and couldn't believe the size of the crowds, the conjestion in the M&M store etc. but what do I know, I'm a hick from the sticks and I don't even go shopping back home, so if you ask me I'd tell you there was no recession in NYC, Wall Street's Finest probably are saying the same thing. I know this is all just anecdotal but if the internet does not allow us to agglomerate the anecdote then what will? Anyway the shopper in the family claims that she is feeling the recession, this despite the fact that we, so far, have no evidence of problems at either of our jobs. Just another piece of the puzzle, but looks like that feeling is out there in the zeitgeist.

Unknown said...

Went to a mall I cannot stand in Concord, CA. Typical Mall, lots of kiosks, ARO, LTD, BKE, plus anchors of M, Sears, and JCP. Noon on Sunday it was empty and everything was on sale. Parked within 50 yards of the mall entrance and when I left there were many open spaces around me. Maybe everyone was tired from shopping Friday and Saturday, but my guess is not. Just saw a headline that said 3 day Black Friday sales were +.9% but foot traffic down 19%. Wow

I did find one of Lyon's nickels on the way out though.

Annie and Lyon Jewett said...


I want it back! Or should I say I need it back?

Anonymous said...

my vote for most over used sell-side phrase is, "well-positioned for an eventual economic recovery"