Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Retailers Are Doomed as Most Americans Are Too Poor to Shop

Companies / Retail Sector Jul 25, 2016 - 03:24 PM GMT

By: John_Mauldin

Companies

BY TONY SAGAMI : We are entering the heart of earnings season. It may be a wild one as Wall Street’s outlook is quite poor.

The consensus Wall Street estimates for Q2 profits of the S&P 500 is a 5.6% fall (YOY). That would be the fifth quarter in a row of falling corporate profits.


The retail industry is particularly vulnerable. (I’ve written about that a lot in my free weekly column, Connecting the Dots, at Mauldin Economics.) Many retailers who’ve previously reported dismal results warn that the rest of the year will be even worse.

In May, retail sales shrunk by 3.9%, worsening from a 2.9% drop in April.

Moody's Investors Service lowered its estimates for 2016 retail sales. The tone of their overall outlook shifted from “positive” to “stable”:

We have scaled back our growth and outlook expectations for the US retail industry primarily due to weakness in four sub-sectors: apparel and footwear, discounters and warehouse clubs, department stores, and office supplies.

Bank of America—which knows a thing or two about credit card usage—said its debit and credit cards data showed particular weakness in four retail areas:

  • Department stores: down 4.0%
  • Teen/young adult stores: down 4.6%
  • Home goods: down 3.6%
  • Electronics: down 3.0%

Most Americans stopped shopping

Discouraging retail results are the result of many developments. One of the more surprising culprits, however, is a growing number of Americans who just can’t afford it.

More than 20%, or 26 million Americans, are simply too poor to shop, according to America’s Research Group (ARG).

We all know about the 47% of Americans that get government benefits. Politicians, however, largely overlooked another 26 million Americans that are the working poor.

This class works an average two to three jobs and pulls in less than $30,000 of annual income.

Even those fortunate enough to make more than that are struggling. Nearly half of Americans have not seen an increase in salary over the last five years. Higher medical insurance deductions reduced take-home pay for another 28%.

As a result, “The poorest Americans have stopped shopping, except for necessities,” said Britt Beemer of America’s Research Group.

It gets worse. Even finding money to pay for necessities is a struggle. Two-thirds of Americans have essentially zero savings. 47% of Americans wouldn’t be able to gather $400 for a doctor visit without reaching out to friends.

Investment Implications

That gloomy news doesn’t mean you have to pass on all retailers. Cash-strapped American consumers are increasingly turning to discount retailers. And they are doing very well.

For example, Dollar General (NYSE:DG) has been on fire due to strong profit growth. In the last quarter, Dollar General beat the pants off Wall Street’s expectations of $0.94 of profit by delivering $1.03 per share.

That was 22% above last year’s first quarter and the fifth quarter in a row that Dollar General exceeded forecasts.

That tells me one thing: catering to cash-strapped Americans can make big profits.

Oh, and for you dividend lovers, Dollar General pays a $1.00 annual dividend.

Other discount retailers that enjoy strong business include: Dollar Tree (DLTR), Big Lots (BIG), TJX Companies (TJX), Wal-Mart (WMT), and Costco (COST).

That doesn’t mean you should rush out and buy any of these stocks tomorrow morning. As always, timing is everything. Discount retailers, however, are one of the few bright spots in the retail industry worth your consideration.

Subscribe to Tony’s Actionable Investment Advice

Markets rise or fall each day, but when reporting the reasons, the financial media rarely provides investors with a complete picture. Tony Sagami shows you the real story behind the week’s market news in his free weekly newsletter, Connecting the Dots.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in