The chart below from the WSJ, summarizes perfectly the hell that US retailers find themselves in. In brief: sales down and inventories soaring, means liquidation sales have to surge, while profits and cash flows crater.
Simeon Siegel, an analyst with Nomura Equity Research, looked at the inventory carried by those and other specialty-apparel retailers at the end of the third quarter and compared it with his projections for the chains' fourth quarter sales. He found that in most cases inventory growth far outpaced sales growth. Normally, the two should be growing about the same. "The ratios are the worst we have seen in quite a while," Mr. Siegel said.
"The worry now is about demand falling, not going through the roof," Mr. Johnson said.
Abercrombie ended the third quarter with inventory up 22% from a year earlier. Yet Mr. Siegel of Nomura predicts the retailer's sales will fall 14% in the fourth quarter.
Marshal Cohen, the chief industry analyst for the NPD Group, said he spotted signs throughout the weekend that stores were overstocked, including goods
stacked high up on shelves and ample merchandise in storerooms.
"When the most common sizes of popular items don't sell out, that's a problem," Mr. Cohen said.
Yes, it is - it means the consumer is fully tapped out courtesy of Bernanke's 5 year (and ongoing) wealth transfer experiment from the middle class to the 0.1%.
Gap and L Brands have had strong years, with their shares up more than 30%. But apparel sales have been suffering as shoppers direct their attention elsewhere. Many consumers, when they are spending at all, are plowing money into their homes and buying new cars.
They don't call it "fun-da-mentals" for nothing. And with Uncle Sam providing all the car loans one could ever need, why buy clothes when you can live naked (or simply rent clothes as they do in Europe) in their NINJA loan purchased (thanks to the government's generosity) Government Motors.
Finally, don't worry about any of the above: surely there is a weather excuse for all of it.