Friday, May 1, 2009

No traffic jams here

I spent a number of hours walking a mall and a lifestyle center last Friday and Saturday. What I saw was certainly at odds with what the oh-so-cheerful talking heads are nattering about these days.

Sure, consumer confidence was better than expected yesterday. But it's still more than 5 points below where it most recently peaked in September 08. And I'm not seeing many signs of that confidence in the malls.

Friday I walked the region's best mall with a reporter friend. Between the already empty store fronts, some of which had been vacant for months, and the stores in the process of closing there are roughly 12 vacancies in a mall that has roughly 160 stores. Historically this mall has immediately put up "Coming Soon" signs as soon as a tenant has left. Not so much these days. In fact, the new highly touted Hugo Boss store is going into a store front that has been vacant save for seasonal holiday shops for at least a year.

Some of the stores that were closing had the big bold signs in the windows advertising the fabulous discounts - put Ritz Cameras and Babystyle in this category. Babystyle, by the way, is the last of the maternity stores in the mall as Motherhood vacated awhile ago. Illuminations was trying to play it cool, advertising 50 - 70% off but not announcing their departure (they're part of Yankee Candle and all the Illumnations stores are closing.)

Another thing I noticed was that the only folks that we saw carrying larger bags seemed to have come from stores with major sales going. Gymboree was clearing out old merchandise at 60% off, and the mommy brigade was definitely buying, albeit not as rabidly as we might have seen a year ago. Most of the other bags we saw were small... and lonely. Many shoppers had one little bag, perhaps holding something the size of a headband or scarf, but certainly not anything approaching a whole outfit. JC Penney continues to have their fans - more than the other department stores it seems. There were certainly a number (although not a large number) of medium sized JCP bags being toted about.

In the misses category, the stronger merchandise was earning sales, but where colors or styles were off, sales were missing. Chico’s seems to be doing okay – I’d put this season’s fashion in the ‘okay’ category. J Jill’s current offerings were beautiful, and shoppers seemed to be responding even though the merchandise was clearly meant for warmer weather than we’re currently experiencing up here. Coldwater Creek… ::sigh:: Let’s just call the current offering a miss in my eyes and move on.

Biggest shock of the trip? Abercrombie, which has sworn that they don’t want to be promotional, is apparently eating their own words. Normally the far back corner room of the store is sale merchandise and everything else is full price. Over the last 6-9 months I’d noticed that clearance merchandise had crept out into the back quarter of the store, almost doubling the floor space devoted to it. I almost had to pick my jaw off the ground on Friday, however, when literally 75% of the total floor space was marked down. April sales reported next week should be interesting.

I know there are a lot of folks who have been playing the retail space on the rebound off desperately low levels. And with Macy’s 146% rebound off the November 19th bottom, that’s been a good trading call. This happiness and joy with retail may even last through the next few weeks of earnings season since a lot of the expectations have been set really low. But I think you really need to ask yourself at this point if the consumer is really any healthier than they were 6 months ago … and if these stocks are worth the kind of mutltiples we’re looking at today. Macy’s at 24x forward earnings? Nordstrom at almost 19x forward earnings? Aeropostale, one of the amazing poster children of this recession who has been kicking tush and taking names in the teen space, is up 162% off the bottom and trading at 14x forward earnings.

All I’m saying is an exit strategy isn’t a bad thing to have in your hip pocket.

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