From the Xpound Blog:
"Put volume is picking up in the SPDR Retail Trust (XRT), as shares sink on disappointing December same store sales numbers. XRT is now off 63 cents to $47.12 and options volume includes 29,000 puts and 3,200 calls through midday. The top trade was part of a spread, in which an investor apparently paid 40 cents per contract for 5,400 January 46 puts and collected 10,800 January 45 puts at 20 cents. This 2X1 put ratio spread, at even money, is a bearish play. It makes its best profits if shares fall to $45 by the January expiration, in 15 days."
December retail sales disappointed according to Retail Metrics Inc. From BusinessWeek:
"Sales at stores open more than a year rose 3.2 percent in December, according to Retail Metrics Inc. That compared with the 3.5 percent average of estimates compiled by the firm and a 5.5 percent increase in November. Retail stocks fell, led by Gap Inc. and Target Corp. as both missed estimates and dropped more than six percent."
Here is the grand finale. Howard Davidowitz, who's been consulting on the retail industry since 1981, thinks the overall consumer is still in "terrible shape" with "17.5% UNDERemployment, 46 million people on food stamps and housing continuing to go down (another 10% would bring a double dip recession). He said the rise in capital markets drove holiday spending mainly in the luxury space (Coach, Tiffany, Saks, jewelry). Sears, Wal-Mart, Toys R' Us, Best Buy, AJ Wright, A&P, Loehmann's, Charming Shoppes are a different story. He also talked about Edward Lampert's strategy on Sears and thinks Wal-Mart is "scared stiff" of Amazon.
Davidowitz ultimately believes that the explosion in online sales (Amazon) will put major pressure on retail commercial real estate going forward (*this is interesting though: Malls Bet on MindSmack's FastMall App to Draw Shoppers Back*).I embedded the video below and provided quotes. Here's what he said:
"We're only at the beginning of this online sales and that has to lead you to question the whole retail real estate strategy. We've got 21 square feet of selling space for every man, woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and tons of shopping centers that are marginal. I think there are huge questions going forward about size of stores, locations of stores, distribution facilities. Huge changes are going to be taking place in the next 5-years as people continue to shop online."
"But in the end, what do you do with the retail space. This is going to be a huge question for retailing in the next 10 years. That's why Wal-Mart is starting to build smaller stores. That's why Wal-Mart is building more overseas than they're building here. There are major questions of positioning. Going forward, it's going to be the biggest retail change we've ever seen." (he called it a revolution)
"I don't think the commercial real estate problems are fixed by any means" (rolling debts, rents and occupancy problems and said hundreds of community banks will close)
WOW. I should probably chart out Retail REITs and developers. He also talked about U.S. fiscal and monetary policy. You can imagine what he thinks about that. By the way, how does the story end with Borders?
Source: Davidowitz Interview Dec. 30 About U.S. Retailers: http://www.bloomberg.com/video/65589812/