Frugal is the new black, according to everyone from David Rosenberg to the US consumer and the beleaguered retailers.
Consider the following piece, which appeared in the New York Times on Friday:
In the retail business, it is never too early to think about Christmas. So a lot of people are thinking about it, and taking surveys to test the mood of the American consumer, and deciding that this Christmas will be as bad as last – which is to say, one of the worst on record.
Retailers are relieved to hear that prediction. Flat sales this holiday season would at least mean that things had stopped getting worse.
“It’s reflective of this ‘new normal’ we’re in,” said James Russo, vice president for global consumer insights at the Nielsen Company. “Flat is good.”That retailers are hoping for “flat” is slightly less shocking when put in the context of their performance during Christmas Shopping Season 08:
the retailing industry posted a sales decline of about 2 percent last Christmas season, the weakest performance since the late 1960s, when the Commerce Department began tracking holiday sales figures. Results for stores that sell clothing and luxury goods were far worse, typically declining by double digits.
Still, the broader lesson is that US consumers are keeping a tight grasp on their wallets, and “charge it” is gradually falling out of their lexicon.
And according to Reuters, it’s not just devotees of Wal-Mart and Costco that have been cutting back (emphasis FT Alphaville’s):
Bankruptcy professionals have a grim view on the U.S. corporate recovery, despite a recent rise in stocks and an uptick in business deals.
“I think it’s going to be a sad holiday season,” said Lynn Tilton, chief executive officer of Patriarch Partners, a private equity firm that specializes in distressed companies.
Consumers will be stingy with their spending, keeping malls and resorts empty, bankruptcy professionals said at the Reuters Restructuring Summit in New York this week. Even the wealthy will steer clear of the wild, brand-conscious spending that marked the last few years.
“No one is conspicuously consuming they way they did in 2006,” said William Derrough, a managing director at investment bank Moelis & Co. “That excess spending creates little boutique hotels, it creates that restaurant that sells the $19 doughnut and the Kobe beef burger. Those things don’t need to exist.”
Another managing director at Moelis, Thane Carlston, neatly summed up retailers’ worst nightmare for 2009:
How well is retail going to fare this year?…I could make a case that Christmas may not come.
Time to go long coals?
Related links:
The thrift bug attacking the economy – Fleet Street Invest
Rethinking the American consumer – Economist Free exchange blog
Inconspicuous consumption (and notes) – James Surowiecki / New Yorker
Abercrombie & Rich – FT Alphaville