I’m taking a look at some of the larger names in retail this morning:

Walmart below expectations
Target below (already lowered expectations)
Saks below expectations
Nordstrom below expectations
JC Penney below expectations
Macy’s below expectations
Gap below expectations
Limited below expectations
Abercrombie & Fitch below expectations (when teens cannot even get money out of their parents pockets to buy $90 jeans you know its bad)
Children’s Place below expectations

Ann Taylor beat expectations (with a whopping 0.5% increase in same store sales)
Kohl’s beat expectations (”only” dropping 3.2% in same store sales instead of 3.8%) To me Kohl’s is “Americana” and a bellweather for reality.

I don’t see news on Tiffany but that company doesn’t really represent the buying patterns of 90% of America.

Any Walmart “good news” is a misnomer - their ‘improvement’ is from cost cutting, not positive sales outlook.

So I notice a pattern here. Again I think the ‘analysts’ underestimate the cost of food spikes and psychology of hearing daily about how bad the housing market is on people - they retrench mentally. Just like the M&A market was in a bubble due to easy credit, I contend retail sales are as well - if this country ever went to “spending” at a level they actually earn money at, retail sales would probably be cut 20-30% across the board. All we are seeing now is “less” use of credit, as people are forced to use credit cards instead of their house for an ATM.

Now the question is when does this get priced into the market? Judging from the retailers premarket it is still not priced in. And the next question is does Wall Street really think this will turn around on a dime? When housing will continue to be weak for (at least) a year, and food prices are rising unabated, AND we will get yet another round of cuts by the Fed to bail out the rich folk who speculated…. so the dollar continues to weaken, leading to more import inflation. SO we can expect October same store sales to rebound I guess.

Again, any bounces in this group are opportunities to short in my book. Restaurants as well. They *will* have dead cat bounces as sellers get washed out but this is not a “1 quarter” issue. Walmart has already started the slashing of prices and to draw in consumers you are really going to see that across the board. Christmas won’t go away - the consumer is not dead. It’s just going to be a consumer looking to buy even cheaper goods so someone’s profit margins must suffer….

Last 5 posts by Trader Mark

• Peter Schiff July 28 2008 on Glenn Beck - August 3rd, 2008
• Bookkeeping: Closing Mechel (MTL) - July 23rd, 2008
• American Express (AXP) Weakening - July 23rd, 2008
• Healthcare Companies that Start with the Letter "I" Outperform - July 23rd, 2008
• Things You Would of Never Said 8 Days Ago - July 22nd, 2008