Tuesday, October 14, 2008

It gets worser and worser

NEW YORK (CNNMoney.com) -- The credit market freeze has added to an incredibly tough sales year for U.S. retailers, and analysts warn that these challenges are just the beginning of what could be a brutal 2009 for merchants.

"The worst is yet to come," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm.

"We'll see some tried and true [retail] names disappear," said Marti Kopacz, managing principal with corporate advisory and restructuring firm Grant Thornton.

Prior to the credit crunch, retailers were already struggling with softening sales as higher gas prices and falling home equity forced Americans to curtail purchases.

Last month's sales at stores open at least a year, which is a key measure of a retailer's performance known as same-store sales, rose just 0.8%, according to sales tracker Thomson Financial. Forecasts were for a 1.5% increase, according to Thomson.

Analysts say same-store sales of 3% or higher typically reflect a healthy U.S. consumer. Since consumer spending fuels two-thirds of the nation's economy, such a low same-store sales number is a bad sign.
Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades yesterday.

No comments: