PERSPECTIVES

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  Hats Off to 2021! But Caution Advised for 2022

  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!

• 

  Consumer Confidence Up Smartly, But...

  • "Consumer confidence rose sharply for a second straight month, hitting the highest level since the pandemic began," according to the Conference Board Consumer Confidence Index. 
     
  • "Economists believe that the rising consumer confidence will bolster overall economic growth as consumers, who account for 70% of economic activity, step up their spending as lockdown restrictions are eased." *

  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.

  • "As more businesses and cities reopen, consumers will have even more places to spend the savings they've accumulated during the pandemic." **

• But, we must take exception....

  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. 

  • First, "enter the total costs involved in selling your products."

  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. 

  • The second entry they request: "Average inventory cost."

  We must take exception. What they surely meant to say is inventory @cost. 

  • Plus, they simply refer to "12 months of ending inventory balances," without specifying that it should be for the same 12 months for the previous entry.

  Only the Beginning
  Turns out, this is only the beginning of the misleading information.

• Call us contrarian, but...

  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.

  • "This week, retail executives presented investors and analysts with downbeat outlooks for the first quarter and the year ahead, forecasting that sales growth, if any, will be much smaller than in years past."*
     
  • "Ross Stores expects sales to be flat for its fiscal year; Kohl's expect its net sales to decline 2 to 4 percent; Macy's said its comparable sales would be down 2 to 4 percent; Best Buy expects same-store sales to fall 3 to 6 percent."

  But, here is the key observation, and an important reminder:

  • "To be sure, while there are worries about the outlook, the data so far don’t necessarily suggest that the economy is in or hurtling toward a downturn."  

  How to reconcile this doom-and-gloom from the big national retailers with our still-strong economy, which is 70% driven by consumer spending? 
   

• Dealing with Your Landlord? This Is Better Than Begging!

  Let's assume your stores have been closed for weeks now. 

  We recognize how conscientious you are. So, after paying what you can to your employees (and yourself), the next most-worrisome dilemma is your rent.

  • How best to get some immediate relief from each month's lease payment?
  • And you wonder, what would be the best way to negotiate with your landlord?

  As you likely have discovered, a common choice for many landlords is to offer to defer your payments. But that means taking on more debt, as those payments are only being postponed to a later point in time. 
  
  You need a better solution than that.

• Once again, "Retailing ain't for sissies!"

  "Buy low. Sell high. Collect early. Pay late."

  That's the essence of retailing, right? But now, in the early summer of 2021, retailing more than ever demands a strong dose of good judgment.
  
  It's shouted everywhere: "Look out! The inflation tsunami is coming!"
  
  Yikes! It's buying season for many retailers, and the pressures to buy more, now, at these-low-prices-that-won't-last are mounting. And this is only the beginning.