The Spending Crunch Is Official: "We Are Confident There Is An Issue With The Consumer"

Tyler Durden's picture




 

Think the Walmart "disastrous" sales memo was a one-off event, which net of Walmart's damage should be completely ignored (something the market has been perfectly happy to oblige with)? Then listen to a separate perspective on the US consumer, this time from a very different angle: that of Town Sports International which operates such gyms as New York Sports Club, and specifically its CEO David Gallagher, who in last night's conference call just confirmed what everyone knows: "As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January."

It goes on:

Based on how broad-based the slowdown has been quarter-to-date, we are confident there is an issue with the consumer. We were going to do everything in our power to make up for this January member shortfall, we continue to see softness and expect to net less than half the net member gain that was achieved in Q1 of 2012. Unfortunately, we are also seeing the softness in our ancillary revenue.

And on:

While the consumer has recently turned much more cautious again, we were hoping that it will be temporary, and we are confident that the foundation and ability to execute at a very high level that we now have in place will serve us well. We have worked very hard to rebound from the recession and rebuild our membership base from the low we experienced in 2009.

And on:

So we’re seeing the behavior very similar and we’re very confident that it is coming from the consumer. As I mentioned earlier in my script part portion, when we look at our business there are really 3 components that we’re watching closely all the time. The first is execution and how we delivering our product and services. Second is, what the competition looks like how it has changed mark-to-market, year-on-year and then in terms of consumer behavior. We’ve seen consumer sentiment change drastically within the last couple of months. We saw that after the first really payroll period in January, which is about the second week of January, we really start seeing a slowdown in Ancillary, Personal Training and membership sales. And our sort of increase that we’ve seen on the cancellation side is directly related to the members that are non-users. So it really does go to the consumer side of the business.

And on:

We believe that once consumers understand our average member is probably losing somewhere in the area of about $1,500 a year once our members understand the impact they have on their daily living with the rising cost of gas and the lower income from social security or the taxes that they’re seeing now.

But there may be hope:

We estimate close to half of this loss is membership attributable to Hurricane Sandy.

Luckily, in a centrally-planned, command economy, who needs such meaningless fundamental staples as cash flow, consumption or even trade...

Source: CLUB earnings call transcript

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Wed, 02/20/2013 - 11:46 | 3259477 LawsofPhysics
LawsofPhysics's picture

The average consumer is a debt slave, no more debt, no more consumer.  Humanity is a fucking non-sustainable ponzi folks, hedge accordingly.

Wed, 02/20/2013 - 11:55 | 3259517 The Juggernaut
The Juggernaut's picture

Its because of Sandy and Nemo, God damn-it!!!!  ...And people sleeping in!  And traffic!!  ...And ...And asteroid D14!!

Wed, 02/20/2013 - 12:00 | 3259557 WayBehind
WayBehind's picture

Calm down. Everything is just fine! Just look at Guns & Ammo. Sold out everywhere. It must be a sign of good economy ... 

Wed, 02/20/2013 - 12:03 | 3259580 brewing
brewing's picture

totally unexpected...

Wed, 02/20/2013 - 12:08 | 3259610 notbot
notbot's picture

Apparently he didn't get the memo from Krugman that the Laffer Curve is snake oil.

Wed, 02/20/2013 - 12:13 | 3259639 The Juggernaut
The Juggernaut's picture

Where's MillionDollarBonus_ and her talk about recovery?  I'm calling you out!!!

Wed, 02/20/2013 - 12:25 | 3259712 DJ Happy Ending
DJ Happy Ending's picture

She is commanding and controlling her menstruation.

Wed, 02/20/2013 - 12:35 | 3259758 Ying-Yang
Ying-Yang's picture

Sports Clubs Network has since grown to include over 150 health and fitness facilities in four major metropolitan areas–New York, Boston, Washington, D.C. and Philadelphia–with nearly a half million members. There are also three locations in Switzerland: the Forum and the Joggeli Fitness Clubs in Basel and the Luxor Club in Zurich.

Stats for 500k members saying "fuck you"

Wed, 02/20/2013 - 13:46 | 3260122 fonestar
fonestar's picture

T-Bill babies.  It's not that there's too many people on Earth.  Just too many people for a ponzi-planet to support comfortably.

Wed, 02/20/2013 - 17:07 | 3261091 Stuffs And Stuff
Stuffs And Stuff's picture

Exactly.

We could change the system to where it could support any number of people, but the elites don't want to do that. The elites would rather keep the system as it is, and kill the 'useless eaters.'

I can't think of anything more disgusting than this.

Wed, 02/20/2013 - 12:08 | 3259613 Sudden Debt
Wed, 02/20/2013 - 12:18 | 3259661 toys for tits
toys for tits's picture

+1

 

LOL

Wed, 02/20/2013 - 12:24 | 3259699 Pooper Popper
Pooper Popper's picture

Just turn the other cheek!

Wed, 02/20/2013 - 18:07 | 3261320 zerozulu
zerozulu's picture

Raising price may help but you need to increase size too.

http://sphotos-a.ak.fbcdn.net/hphotos-ak-ash3/539842_487108804681970_374...

 

Wed, 02/20/2013 - 21:50 | 3261896 NumNutt
NumNutt's picture

Guess what? If you take peoples money, they have less to spend, go fucking figure.  The PHD's in Washington DC are just now figureing this out.

Thu, 02/21/2013 - 03:30 | 3262475 swiss chick
swiss chick's picture

TPTB probably think that people should take out loans to cover it...

Wed, 02/20/2013 - 12:02 | 3259577 Bad Attitude
Bad Attitude's picture

More people need to drink Dear Leader's KoolAid, then everybody would feel better.

Wed, 02/20/2013 - 12:17 | 3259656 toys for tits
toys for tits's picture

 

 

It's Bush's fault.

Wed, 02/20/2013 - 13:49 | 3260145 fonestar
fonestar's picture

Asteroid D14 likely caused by global warming according to MSM blonde talking head:

 

http://www.youtube.com/watch?v=SvdX1gqu3bw

Wed, 02/20/2013 - 17:14 | 3261119 mt paul
mt paul's picture

forty two below zero

on the tundra this morning 

long global warming ..

Wed, 02/20/2013 - 18:45 | 3261416 Flakmeister
Flakmeister's picture

What's your point?

Wed, 02/20/2013 - 14:03 | 3260213 Groundhog Day
Groundhog Day's picture

Perhaps its the DEFLATION effect retard.  With all the empty retail space available at rock bottom prices, Gym's like Retro-Fitness and Club Metro offer all the ammentites for 19.99 a month and you can use any of their gyms,  HHMMM 50/ month or 20/mo this is a real tough decision

Wed, 02/20/2013 - 14:07 | 3260235 Groundhog Day
Groundhog Day's picture

But Krugman told us the damage and loss from Sandy will add to GDP and spur on economic activity and lead to more jobs in construction and small business and they will in turn spend money at New york sports club?  WTF happened?

Wed, 02/20/2013 - 12:04 | 3259582 Cdad
Cdad's picture

@lawsofphysics

You fail to embrace the perfect efficiency of the Federal Reserve.  Thanks to their hard work, cash flow is no longer needed.  Jobs, wages, wage raises...all perfect relics of the past.  Credit card become SNAP cards.  Home values no longer require market forces, and are simply seasonally adjusted...in your favor!

You must be taking the wrong colored pills.  I would suggest that you speak to your physician about how certain medications might help you to better assimilate per the Bernank's desires for you.

Wed, 02/20/2013 - 12:16 | 3259629 TruthInSunshine
TruthInSunshine's picture

Bernanke has altered fundamental ECONOMIC mechanics forever.

He has created a utopia whereby he can instruct every person to buy shares in Facebook, then he can direct/urge unlimited amounts of conjured (and debt derived) fiat towards the purchase of Facebook shares, which will create 1000% to 50,000% returns for those people who purchased it, they can then realize their gains, pay taxes on those gains, and stimulate the economy with massive purchases of goods and services derived from those gains.

There are no losers in this equation. Investors get slam dunk and massive "virtuous circle wealth," government gets massive tax revenue from the liquidation of that "virtuous circle," and the economy gets a "virtuously circular" stimulative benefit post virtuous circle liquidation.

Or something like this.

Wed, 02/20/2013 - 12:20 | 3259669 syntaxterror
syntaxterror's picture

Yep. The Perpetual Motion Machine has in fact been invented folks.

Wed, 02/20/2013 - 13:37 | 3260061 piceridu
piceridu's picture

TIS, just described, with such eloquence, the "virtuous circle" jerk 

Wed, 02/20/2013 - 12:19 | 3259665 Shizzmoney
Shizzmoney's picture

The average consumer is a debt slave, no more debt, no more consumer.

The avg employed consumer is deleveraging.  Why? Because (like me) they know that the next shoe is to drop soon, maybe as early as 2014-2015, and we want to hedge accordingly against our corporate system, which will throw us under the bus once it falls. 

I'm out of debt by April.  It's going to be fucking sweet.

Humanity is a fucking non-sustainable ponzi folks

I wish I could say no - but maybe you are right.  We don't have the gumption in us to be honest with each other, never mind helping one another to fix things (until SHTF).

Wed, 02/20/2013 - 12:24 | 3259696 Boris Alatovkrap
Boris Alatovkrap's picture

There is not hedge against pure debt. Debt is to use future output. When catch up impossible, collapse inevitable.

Wed, 02/20/2013 - 12:50 | 3259800 TruthInSunshine
TruthInSunshine's picture

A glaring deficiency in economies that are fueled by endogenous fiat money, where the volume of fiat in circulation-- or not circulating depending on the engineered gameplan-- is controlled by private banking entities (that just happen to control monetary and fiscal policy via their control of "elected officials" and "regulators").

Economists often realise that disequilibrium and finance are important, but their faulty view of the banking sector causes them to miss the mark. Take neoclassical models such as Krugman’s, which argue debt is merely a redistribution from savers to borrowers, and have to add ‘special case’ considerations to make debt matter. But this is misguided – debt always matters, because money enters the economy primarily as new debt, which the economy must expand to service. Hence, debt must go into productive investments, which create future income streams, rather than bidding up the price of assets

Wed, 02/20/2013 - 12:31 | 3259733 Lewshine
Lewshine's picture

Of course the consumer is dead. They have been since 08. Ben knew that, he saw this coming - his answer was to pour liquidity into the economy through QE - We are quickly finding out it ain't working!! The only thing keeping this POS economy adrift is the banks taking the QE cash and buying equities, couple that with the media lies regurgitating fake government stats and you have what we see today. We are hanging by a thread, and reality looms large. It can't happen soon enough for me.

I want to see these CNBC anchors and guest jumping out of windows and hanging themselves based on their realized losses. I want to see 200 million standing in front of the whitehouse and the Fed building in NY demanding warm bodies. Ben knows how real these circumstances are which explains this parabolic rise in stocks...It his fawkin waterloo and he knows it!

Wed, 02/20/2013 - 15:45 | 3260758 Omen IV
Omen IV's picture
NYT: Public Recreation Centers Looking to Stem Exodus

 

By

 

Under Mayor Michael R. Bloomberg, the city has made fighting obesity and improving public health one of its top priorities.

But pricing decisions by the parks department resulted in a 45 percent drop in paid memberships at its recreation centers, essentially city-run health clubs where New Yorkers who cannot afford memberships at expensive gyms, can work out. In an effort to raise revenue, the department doubled its annual fees a year and a half ago, to $150 for recreation centers with pools, and $100 for those without.

The department had projected a decrease of 5 percent in memberships in the first year after the fees doubled; instead, almost half of the adult and senior members did not renew. Similarly, the department had hoped to realize $4 million in new revenue, but in fact, it lost about $200,000.

In a clear acknowledgment that the policy had backfired, Veronica M. White, the parks commissioner, announced at a City Council hearing on Jan. 30 that the department would create a new lower-priced membership category for young adults, ages 18 to 24. Memberships were — and still are — free for children under 18, but with the higher fees, those turning 18 suddenly had to reach into their pockets. As a result, that age group had the steepest drop in memberships — 55 percent.

Ms. White has proposed charging 18- to 24-year-olds $25 a year, the same rate that members older than 62 now pay. The department must get approval for the new fee schedule, which is expected. “This new category will help us to engage a very vulnerable population,” Ms. White testified, adding that health department statistics showed that 51.5 percent of young adult males in New York City and 30.7 percent of females were overweight or obese.

Doubling the fees might have seemed like a good idea, said Holly M. Leicht, executive director of New Yorkers for Parks, a nonprofit advocacy group. “The parks department is so strapped that when it is asked to do these mandatory budget cuts or revenue increases, it really doesn’t have good options without cutting into its core functions and services,” she said. “It seems like we are cutting off our nose to spite our face.”

At the hearing, Ms. White said the department was also trying to reach out to older people who had dropped their memberships. The pricing set in 2011 not only raised the annual senior membership fee to $25 from $10, but also raised the qualifying age, to 62 from 55. While existing members were grandfathered in at the senior rate, the recreation centers did not always make that clear. As a result, 8,000 adults between the ages of 55 and 61 dropped their memberships rather than pay the adult rate.

The parks department will reach out to the older defectors by phone, mail and e-mail with a “limited time offer to rejoin at the senior rate of $25 a year,” Ms. White testified.

Ms. White pointed out that memberships at the recreation centers had started to climb back since last summer. At the end of January, there were 122,851 members, an increase of 10 percent from late June.

According to New Yorkers for Parks, hundreds of thousands of New Yorkers cannot afford the fee increase. “Thirty percent of Bronx residents alone — more than 400,000 people — are living at or below the poverty rate of $23,021 per year for a family of four,” Ms. Leicht said. “For these families, an extra $50 or $75 is often prohibitive.”

Thu, 02/21/2013 - 02:11 | 3262409 Joseph Jones
Joseph Jones's picture

We sent all our manufacturing overseas.

Do we have the skill and tools to make enough guillotines for these folks?  How did that "drawn and quartered" thing go again? 

Wed, 02/20/2013 - 11:47 | 3259479 Lendo
Lendo's picture

I'm going to sarcastically use Hurricane Sandy as an excuse all year to upset my statist friends.

Wed, 02/20/2013 - 11:51 | 3259513 Cursive
Cursive's picture

@Lendo

When I read that bit about Hurricane Sandy I had to keep myself from exclaiming, "Hurricane Sandy?!"  

Wed, 02/20/2013 - 12:04 | 3259592 brewing
brewing's picture

bush's fault...

Wed, 02/20/2013 - 11:48 | 3259483 Dr. Engali
Dr. Engali's picture

People's checks are a little smaller and their expenses are higher. Thank you for the wealth effect, or the lack of it,  Bernank.

Wed, 02/20/2013 - 11:50 | 3259499 IridiumRebel
IridiumRebel's picture

FUCK YOU BERNANKE

 

there....fixed it for ya

Wed, 02/20/2013 - 11:55 | 3259526 Sudden Debt
Sudden Debt's picture

Bernanke did give a Service Manual with his QE's....

DIDN'T YOU READ IT?!!

http://24.media.tumblr.com/tumblr_lfcj74krUk1qbbpaoo1_500.gif

Wed, 02/20/2013 - 11:59 | 3259556 MiltonFriedmans...
MiltonFriedmansNightmare's picture

David Gallagher, keep an eye peeled to the sky for the black helicopters and/or drones.  Your candor is not appreciated.

Best,

Barry

Wed, 02/20/2013 - 12:23 | 3259620 McMolotov
McMolotov's picture

The Wealth Effect: A small number of well-connected bankers and their friends get wealthy while the rest of the people see none of it, the effect of which is a growing chasm between rich and poor that is typically resolved with bloodshed.

Wed, 02/20/2013 - 12:11 | 3259630 DaveyJones
DaveyJones's picture

"consumer-sentiment"  is that the new word for poverty? 

Wed, 02/20/2013 - 14:34 | 3260379 SDShack
SDShack's picture

Add to the fact that the sheep that bought the lie that the economy was improving 4Q12 and spent for the holidays, are now seeing their credit card bill come due. Higher expenses for gas and food, no wage increase, no housing wealth, higher taxes, less take home pay, and no way to pay off the credit cards... means no more consumer spending. Hello double dip.. or more acurately... recession dip into depression.

Wed, 02/20/2013 - 11:48 | 3259488 suteibu
suteibu's picture

"...we are hoping that it will be temporary."

Hope, the motto of the 21st Century economy.

Wed, 02/20/2013 - 11:57 | 3259536 Sudden Debt
Sudden Debt's picture

Well... as my History teacher always said:

JEZUS WAS BORN AND A MOMENT LATER WORLD WAR 2 HAPPENED AND AFTER THAT WE LANDED ON THE MOON!

Wed, 02/20/2013 - 12:13 | 3259638 DaveyJones
DaveyJones's picture

...and after that Skype, Twitter and Facebook became a verb 

Wed, 02/20/2013 - 11:58 | 3259548 tango
tango's picture

So true.   I was thinking the other day of the paradigm shift in thinking about the economy, the future and personal goals.    Growing up, your "goal" was to get married, get rich and live happily.  You knew that savings and planning and prudence and sacrifice were necessary elements to life.   No more.  Savings are not needed now that handouts are ubiquotiously available.  Planning has been replaced by temporary fixes.  Prudence was thrown to the wind as folks willingly took on massive debt.     Sacrifice was traded for immediacy. And now, the vast majority truly believes we can keep down this path forever without consequences.  

Wed, 02/20/2013 - 12:04 | 3259574 Sudden Debt
Sudden Debt's picture

Growing up, your "goal" was to get married...

well... mine was a bit different...

1. Get laid

2. Get drunk

3. Get laid

4. Get drunk

 

 I think my decade was more fun...

Wed, 02/20/2013 - 12:06 | 3259599 notadouche
notadouche's picture

Good plan and always never forget that getting married signals the beginning of the end of your goal of getting laid, especially with the addition of children.  

Wed, 02/20/2013 - 12:20 | 3259670 espirit
espirit's picture

Pay by the piece, or pay for the rest of your life.

Do NOT follow this link or you will be banned from the site!