Ed Butowsky, managing partner of Chapwood Investment Management, appears live on Fox News over the Christmas holiday weekend to discuss how the after Christmas shopping will help retailers.
On the day after Christmas the weather in the Northeast is throwing retailers a curve ball. Retailers are banking on big after Christmas sales that may be a big bust in the northeast because of the blizzard, but in other parts of the country people have been hitting the malls spending the money they got for Christmas.
While parking spaces may have been hard to find at local malls the one day sale items and post holiday clearance bargains were not. Ed Butowsky explains that these sales and bargains today and throughout the week after Christmas are not so much the ingredients of a great holiday season but the icing on the cake. Retailers started their season a little earlier this year, back in early November, in hopes of pulling together a profitable season. This last week of the year is the push to finish the year strong. However, as Ed points out, the markets have seen a little slow down towards the end of December before the holiday. This turned out to be a little surprising considering what investors and retailers had hoped for based on the trends. Furthermore, Ed points out that in the Northeast the blizzard conditions will cause a major problem to retailers. This last week of the year, post holiday Christmas sale shopping, represents approximately 10% of the sales that occurred in the previous 30 days of the shopping season. Now this storm, with a big population in the Northeast, will cause problems to retailers trying to push for the post holiday Christmas sale rush.
As investors look on the overall performance for this holiday season by retailers how does the weather and other factors impact the books that will be closing in a week? Ed points out that the performance of most of these stocks is predicted 6-9 months in advance based on sale trends and economic indicators. This weather in the Northeast may impact those numbers for this quarter and be a disappointment. Furthermore, Ed points out most of these retailers have soo many promotions going on to lure consumers that at the end of the day the profits may not be there. Overall, investors should be very cautious when taking a look at investing in retail stocks.
Is this holiday season a foreshadow to how the rest of the economy is doing? People are spending money on Christmas sale items and feeling a little euphoric; however, as Ed points out, this is not an indicator of how the economy will do entering into the new year. While we now have better clarity on the next two years for the tax policies there are still many unknowns. Ed feels we have to get job growth and see unemployment drop to help this economy.
This economy is forcing many businesses that have been around for a very long time to examine their books more so now then before and make those hard decisions of whether they can survive or not. As Ed points out many business made adjustments throughout the year to stay in for the holidays, and many of those businesses needed a great holiday season to continue. Some may succeed, but don’t be surprised if some of the businesses that we have come to know for 30-40 years fold because of economic pressures. This year, especially, many retailers have been struggling because of the macro economic conditions in this country and the rest of the world.
Overall, consumers this year were shopping more this year then in the last couple of years. It is evident that people feel more positive about what is happening towards trying to recover then in the past, and that translates to people and consumers looking forward to over coming that next hurdle. As Ed points out, people did spend money this season on gifts and such, but they are still cautiously optimistic about making those bigger purchases.
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry.
Tags: blizzard, day after christmas, fox news, holiday shopping, returns, sales