Signs of Weak Holiday Spending Are Starting to Emerge

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.

In a few days, we’ll close the books on both the month of September and 3Q 2013. Soon, we’ll be inundated with corporate earnings reports and assessing whether the results met expectations and how solid the coming outlook is for the last three months of 2013 and early 2014. Those last three months of the year also are a key time for retailers — the holiday shopping season. It’s hard to believe that Black Friday is only 60 or so days away.

For the uninitiated, Black Friday is the day following Thanksgiving Day in the United States, often regarded as the launch of the Christmas shopping season. What you also may not know is we already are starting to see ads and deals for Black Friday this year from companies like Wal-Mart Stores (WMT) and Kohl’s (KSS). In 2012, we saw a number of deals from those two companies, as well as Target (TGT), Sears Holdings (SHLD), Aeropostale (ARO), Barnes & Noble (BKS), Dollar General (DG), Home Depot (HD), Best Buy (BBY), Sprint-Nextel (S) and dozens of others.

Lay away makes a comeback — again. It won’t be long until we are hit with a maelstrom of would-be Black Friday savings and holiday shopping deals from those companies and others. Wal-Mart already kicked off its nationwide holiday layaway program on Sept. 13, which lasts through Dec. 13. Joining Wal-Mart in reviving this once-popular shopping payment plan are Sears, Toys R Us and Kmart. Perhaps they’ve anticipated a weaker holiday shopping season than we’ve experienced in the last few years and are looking to shore up their business where possible.

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Wal-Mart’s lumps are not a good sign for the consumer. Keep in mind that back-to-school spending this year was choppy and a number of retailers posted disappointing results. Even Wal-Mart reported weak sales last month and shared its view that a challenging environment would persist into the fall. Then this week, Wal-Mart announced it was cutting orders to reduce its inventory for the rest of the year. In the company’s commentary, there were two key items that don’t bode well for the upcoming holiday shopping season. First, consumers are not spending at the rate predicted by Wal-Mart executives. Second, Wal-Mart isn’t hiring enough workers to keep its shelves stocked. Remember, Wal-Mart is the country’s largest retailer and if it is seeing this problem, odds are it is not alone.

That weakness gives some credence to ShopperTrak’s 2013 holiday shopping forecast that calls for retail sales in November and December to rise by 2.4% from a year earlier, less than the 3% increase in 2012 and below the gains of around 4% in 2011 and 2010. We soon will receive other predictions and prognostications for this year’s holiday shopping season from firms like Gallup and others like the National Retail Federation.

More holiday spending forecasts on the way. While it’s a little early to put one’s faith in the exact percentages being forecasted, I’ll be watching the vector of those soon-to-be-released forecasts. Given the weak August Employment Report, data shows that average household incomes are down compared to that a few years ago. And the Fed’s view is that the economy is not yet strong enough to warrant tapering. It very well could be a more challenging holiday shopping season than we have seen in the last few years. Not only should you be careful what you ask for this holiday season, but you should think twice before buying shares in a retailer or retail-focused exchange-traded funds (ETFs) like the SPDR S&P Retail (XRT), Market Vectors Retail ETF (RTH) and PowerShares Dynamic Retail (PMR).

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Given concerns about The Cash Strapped Consumer, subscribers to PowerTrend Profits have been positioned for this weaker holiday spending for some time. While others try to figure out how to invest for this holiday season, I’ll be busy working hard for my subscribers to find the next big movers and shakers like Starbucks (SBUX) and Facebook (FB). PowerTrend Profits subscribers are up big by double-digit percentages in both, and we’re just getting started.

PowerTalk with Mike Serbinis, CEO of e-book, e-reader and tablet company Kobo

Joining me on PowerTalk this week to discuss the e-reader market, its new line of Android tablets that are designed with readers in mind, as well as how it works with small book retailers and more, is Mike Serbinis, the CEO and founder of Kobo.

Much like many other industries, the publishing industry has been rocked by technology. How we consume information has changed and that situation means how people read has changed as well. Print continues to cede ground to digital publications that can be read on e-readers, tablets, smartphones and even on your computing desktop. We’ve seen magazines, like Newsweek, shift from print to only digital and newspaper companies such as The New York Times (NYT) try to figure out a pay-wall solution for content. We’ve seen once-prominent bookstore chains go out of business. In the case of Barnes & Noble (BKS), the company shrank its footprint.

Now when most people think of reading digitally, they tend to think of either the Apple (AAPL) iPad or Amazon.com’s (AZMN) Kindle e-reader and Fire tablet. While those are viable solutions, there is another out there. The Wall Street Journal named the Kobo Aura HD the “best e-Reader,” beating out Amazon’s Kindle and the Nook from Barnes & Noble. I have to say I have been trying out the Kobo Aura and it’s great. Its online bookstore has 4 million books to choose from, as well as newspapers, magazines and more. During our PowerTalk, Mike shares a number of insights about where all of this technology is heading and he reviews some of the strategic moves that Kobo is making to be ahead of the curve.

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Click here to listen to my one-on-one conversation with Mike Serbinis, CEO of Kobo

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

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