In Shakespeare’s Julius Caesar, the soothsayers warning "Beware the Ides of March," displayed a sense of foreboding. The ides of March in Julius Caesar was the 15th of March, a day of bad luck and evil.
Is November 28th going to be a newer version of the Ides of March? A new Ides of November?
Why do I state a specific date as the new of Ides of March? Well this is going to be the date of this years Black Friday, ie the Friday following Thanksgiving. The Friday following Thanksgiving (the 4th Thursday of November) is traditionally the start of the Christmas shopping season. Stores throughout the US see a sudden boom in sales and the period of loses (red on the account books) are wiped out. This is the period in which retailers are back in the black.
All the signs of a slow down are there but, is it a tip of the iceberg?
1. Unemployment is up to 5.7% as of July 2008 and expected to rise to 6.5%
2. Mortgage defaults are up almost 100% over the same period in 2007.
3. Housing prices are down by up to 20% causing greater fear and recession.
4. Fuel consumption is down 2%. Americans are driving 4% less then they were last year (one of the highest drops since 1942). This not just due to high oil prices but the sheer inability to pay.
5. The auto industry is in a tailspin with plans to close down assembly lines for gas guzzlers and companies reporting losses of tens of Billions.
6. Freddie Mac and Fannie Mae which between them refinance 5 Trillion dollars, of housing loans are between them in a not so good shape.
The latest worry is that the average American is using his credit card to shore up the weekly spending on basic necessities like groceries; sums in a tight market which would be difficult to repay leading to more defaults. In fact this trend seems to be happening. There just seems to be not enough money in the home front.
So with such a dire situation what will happen to Black Friday? Will it be a Red Friday?
Tuesday, August 19, 2008
The Coming Retail Crash -Ides of March
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After yesterday’s dramatic turn of events, there is red all over the markets. How it will be in November or December, can’t be categorically said, although a domino effect seems to be just around the corner. With dark clouds looming over some of the biggest banks and FIs the horizon seems rather bleak.
The upswing in inflation and a low market sentiment is a lethal combination and will surely hit margins across the retail spectrum globally. For India, the month long festive sales starting from Navratri going upto Diwali is also peak marriage season, so that may prove to be the proverbial silver lining. But most certainly, nowhere will the ‘real’ earnings be as much as the Indian retailers have enjoyed over the last couple of years.
In times of trouble new innovative solutions will need to be sought!
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