We’re a guy, so we only go to the mall when one of two things occur:
1) A kid’s birthday party at the Mall of America
2) When we need underwear
However, we need to focus on consumer spending for investment purposes despite our lack of fashion élan. One thing we have noticed is the number of retailing companies that are mentioning weak traffic and heavy discounting. It seemed to start with the teen retailers, but the trend seems to be more systemic than we thought. Even some of the better performing names in the group and even certain ecommerce companies are discussing weakness. That got our attention.
The question we have is why is this happening? One argument is the government shutdown. Perhaps, but some retailers, especially the teen retailers, were seeing less traffic/conversion well before the shutdown. Could it be the sequester causing the slowdown? We would like to see results out of broader areas of the economy this earnings season, such as manufacturing, before we lay credence to that theory. Could it be employers are adjusting hours in advance of the Affordable Care Act? We have seen some companies such as Forever 21 adjusting hours downward to limit the number of full time workers. Others such as Walgreens are moving their employees to private healthcare exchanges, and some other companies are doing the same for their retirees. Could it be tax increases earlier in the year now affecting the consumer? Is it the consumer trying to tell us something about their future spending and job prospects that are not showing up in the data yet? Could it be a combination of all of the above? Or are there a lot of people like us that have plenty of underwear and don’t need to go to the mall? What do you think?