Reading the 4th quarter tea leaves with two weeks to go

I published the following comment on the RetailWire blog with about two weeks to go before Christmas. There are two looming questions, becoming even more urgent as the 25th approaches: What sort of sales reports can we expect? And how are retailers with excess inventories dealing with the margin impact of clearing goods from the shelves?

Chains like Best Buy appear headed for softer margins as they try to sell electronics categories subject to increasing competition (Amazon) and commoditization (TVs and laptops). And Costco seems to be headed in the same direction (lower margins) even though its share price is not being punished like Best Buy’s.

Stores that are driving higher demand around exclusive brands (Macy’s, for example) are likely to be rewarded in the current quarter, even though they have had to deal with higher apparel commodity prices all year. And, finally, a lot of the margin outcome depends more than anything on leftover seasonal inventory after Christmas; stores heavily invested in cold weather goods cannot be happy with the current trend.

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