We’re in the Eye of the Financial Hurricane
CaseyResearch.com
March 01, 2016
American stores are hurting…
Two weeks ago, we pointed out that giant retailer Wal-Mart just had its worst year since 1980. Sales fell for the first time in 35 years. The company plans to close 269 stores.
Since then, retailers have announced a flood of ugly results, The Wall Street Journal reports.
On Thursday, Kohl’s Corp. said it would close 18 stores after reporting weak sales, while Sears Holdings Corp. is looking to sell $300 million in assets after reporting yet another loss. Best Buy Co. warned of weak demand for electronics, and shares of Restoration Hardware Inc. plunged as much as 29% Thursday after it blamed poor sales on a “pullback by the high-end consumer.”
Earlier this month, Kohl’s (KSS), another major retailer, reported that its profits fell 20% last quarter. Profits for clothing company Ralph Lauren (RL) fell 29%. Profits for The Gap (GPS), another clothing company, plunged 33%.
Dispatch readers know retail stocks can give advance warning of economic problems. Consumer spending accounts for 67% of the U.S. economy. When folks start to cut back on buying clothes, furniture, and televisions, these companies feel it first.
• Retail stocks were hot over the past seven years…
The SPDR S&P Retail ETF (XRT), which tracks 100 U.S. retailers, surged 500% from March 2009 to July 2014. The S&P 500 only climbed 215% over that same time.
Since July, XRT has dropped 14%. It hit its lowest level since 2013 this month.
• Many huge U.S. corporations are losing money…
Industrial conglomerate General Electric (GE) lost $6.1 billion last year. Profits at Exxon (XOM), the world’s largest oil company, plummeted 58%. Profits for Caterpillar (CAT), the world’s biggest machinery maker, plunged 43%.
As of Friday, 96% of the companies in the S&P 500 had reported quarterly earnings. Based on those results, S&P 500 earnings are on track to drop 3.3% for the fourth quarter. This would mark the third straight quarter of declining earnings for the S&P 500. That hasn’t happened since the 2009 financial crisis.
The Rest…HERE
