Maybe you noticed this (see "Retailers Lay Out a Downbeat Outlook"*) but the big national retail chains, despite better-than-expected quarterly earnings this week, still are looking at a year of low to no growth, citing reduced spending by lower income groups, the loss of covid relief money, the effects of inflation, etcetera.
But, here is the key observation, and an important reminder:
How to reconcile this doom-and-gloom from the big national retailers with our still-strong economy, which is 70% driven by consumer spending?
Here's how: While consumers are presently adjusting their spending because of inflation, there is a long-term – and seemingly enduring – change that in our contrarian view has yet to be fully recognized by some of the pundits. (Our feelings are not hurt.)
Shoppers appreciate the unique selections, focus on quality, customer service, etcetera of these local or regional operations.
All of which may well explain why consumer spending has maintained its strength, much to the puzzlement of the Big Guys and those who focus only on the Big Guys. Our contrarian view: this year will be surprisingly strong for independent retailers generally. Now, what do you think? ---- * Retailers Lay Out a Downbeat Outlook as Inflation Squeezes Low-Income Shoppers, Jordyn Holman, New York Times, Saturday, March 4, 2023.
You've gotten through the Holiday season, likely enjoyed some vacation time, and perhaps even have your own financial statements in hand. For many retailers, 2021 proved to be a very profitable year. Congratulations! In fact, go here to check out the pre-tax profit trends for the past two years for the median performers in 50+ retail segments. To borrow a phrase, everybody (almost) is above average!
This is welcome news for many retailers, as consumer confidence has been a key leading indicator of retail sales. However, a note of caution: retail sales are not the sole component of consumer spending.
We're sure you'll agree. Misinformation can be very harmful. Retailers surely don't need more harmful anythings!
Just last week, we came across the proverbial straw that broke the camel's back. It was a post on the Intuit Quickbooks site*, titled "Inventory Turnover Ratio." And the explanatory article was accompanied by an "Inventory Turnover Calculator."
What do we take exception to? The misleading and/or incorrect information it provides. For example, their "Inventory turnover calculator" requires two entries.
We must take exception. "Total costs involved in selling your products" is NOT the same as Cost of Goods Sold. Nor do they specify that it should be for a 12-month period of time.
We must take exception. What they surely meant to say is inventory @cost.
Here's a post-pandemic strategy that should not be missed: higher margins! Not the entire store, of course; you must be a merchant here. But think about it: many shoppers have increased savings, reduced debt, or gotten their job back. Maybe all three. And after months of being at home, and spending on home improvement and groceries, many shoppers have pent-up demand to spend on items they have had to postpone, like for themselves. Whether that would be in a restaurant or in a specialty store, shoppers are more willing and able to spend. (And some even feel entitled to spend.)
We were struck by these comments from folks for whom "back-to-school" is more than a season. Look what a state superintendent of public instruction* had to say about the upcoming school year.
Lots of retailers can identify with those comments, don't you agree? Or, these observations about the disruptions and uncertainties of the pandemic:
It's a new year. And now, another new month. How about a new sense of beginning, a fresh start? Alas, the coronavirus pandemic continues to prove Dr. Anthony Fauci right:"The virus is in charge." As you have noticed, all around us there's delay. From Major League Baseball contemplating a month delay, schools and universities very slowly resuming in-person classes, or a decidedly different lineup and focus of Super Bowl advertisers, we have no choice but to continue to be patient. Isn't that the pits? As Daphne Howard reported*, "Footfall patterns show that getting back to normal requires more than flipping the "open" sign.
Still less than $1 a day! 👀
Start NOW!