Black Friday

Who wants to be long?

For stores, the holiday season may already be over

By ANNE D’INNOCENZIO, AP Retail Writer

Thu Nov 27, 4:33 am ET

Major department stores and mall-based chains have cut prices up to 70 percent to move out mounds of excess inventory stuck in the pipeline since the financial crisis hit in September and people snapped their wallets shut.

Big moves of merchandise happen every year – but usually after Christmas. This year stores are desperate to shed inventory even before Thanksgiving.

…

It wasn’t supposed to be this bad. Stores, which typically place orders about four to seven months in advance, had cautiously planned their holiday inventories about 15 percent below last year’s levels.

But because of the free fall in consumer spending, stores are now stuck with about 15 percent to 20 percent excess holiday inventory, estimated Burt P. Flickinger, managing director of Strategic Resource Group.

…

How bad will the season ultimately be for stores? Mark Vitner, senior economist at Wachovia Corp., expects total retail sales to fall 0.5 percent for November and December. That would be the first decline in holiday sales since 1982.

The problem for a retailer is that most of their capital is tied up in merchandise, most of which is ordered up to 6 months or even a year ahead of time.  Like everyone else they buy on credit and count on income from sales to pay off the loans when they come due.

This year, just like hedge funds, they are liquidating assets (inventory) in anticipation of margin calls and redemptions.

But Wait!

Credit where due, I found this on HuffPo-

The Black Friday Ten: Retailers Who May Not See 2009

24/7 Wall St.

November 26, 2008

1. Bon-Ton Stores
2. Dillard’s
3. Talbots
4. Pier 1
5. Cost Plus
6. Williams-Sonoma
7. Chico’s FAS
8. Saks
9. Eddie Bauer
10. Rite Aid

Speaking of credit, I’d recommend you not buy gift cards this year.  Always they have the problem that the terms are usually no better than most retail credit agreements.  A typical tactic is to reduce the face value on an aggressive time scale.

This year though, bankrupcy eliminates all existing contracts unless restructured or affirmed by a court, so your money is not at all safe.  Nor are you likely to see much stock or variety of desired items.

Markets are open from 9:30 am to 1 pm, coming off a 4 day rally that has carried us back to the high 8Ks.  Everyone on CNBC was feeling particularly Bartiromo on Wednesday, it will be interesting to see if that optimism lasts.  It will certainly be instructive to see the retail sales figures for the season.  We’re a week away from the next jobless report.

The business media, who are nothing more than shills, are puffing the traditional hype about early bird shoppers lining up in droves and the “great” bargains that are available.  Overnight markets in Asia are showing a continued rise, but if you trade on a daily basis I’d be asking myself- do I want to be long this weekend?