Q2 Retail Earnings, One Expert Says "Horrible"

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Q2 Retail Earnings, One Expert Says "Horrible"

By Dave Weinand - 08/12/2013
David Berman, founder of Durbin Capital, which runs a hedge fund specializing in retail gave his opinion on CNBC about the upcoming Q2 retailer earnings reports. He stated, "We actually think it's going to be a lot worse than people think. We thought things would bounce back, but they don't seem to have."
 
Coming on a weaker first quarter than most expected at 2% growth versus 4% in the previous quarter, Berman stated that even though things like weather could be playing a slight factor in the second quarter, the consumer is simply spending money elsewhere, for example travel, homes and cars. According to Berman, "The consumer, as I see it, is actually not weak. I think the retailer is weak." Berman's statements were consistent with what RIS News has been reporting for years by commenting that retail is in a new whole new paradigm with the ability for consumers to shop from anywhere via tablets, etc. The winners will be the retailers that can integrate the experience online and in stores.
 
In what is perhaps one of the more eye opening statements made about the growth in retail sales dating back to Q1 was the fact that close to 50% of the growth in Q1 can be attributed to just three companies: Amazon, Apple, and Samsung. Apple and Samsung grew 13% respectively and Amazon grew 22% while all other retailers combined grew just 1% (excluding auto and housing).
 
Although several retailers have recently reported strong monthly earnings, Berman noted that 90% of retailers have stopped reporting on a monthly basis and only the best in class retailers continue to do so. These include Costco, The Limited, The Gap and The Buckle. To further his predictions Berman noted that their data shows inventories at the end of Q1 were high relative to sales growth, therefore discounting was heavy and will hurt Q2 profits.  
 
The macro environment is certainly improving and one quarter does not make a year but if the numbers play out like are being predicted, some IT projects could be put on hold until things improve. Let's hope Mr. Berman is wrong.
 
For related content:
Barnes & Noble, JCP, Sears to Close Hundreds of Stores in 2013
Top 5 and Bottom 5 Retailers of Q1 2013
Top and Bottom 10 Retailers in Customer Experience

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