Wednesday, November 12, 2008

Best Buy Warns and Other Stomach-Churning Headline News

Best Buy warned of a "rapid seismic" slowdown in consumer spending and lowered its profit forecast for the full year ending in February significantly, from $3.04 to $2.30 per share.  October sales plummeted 7.8% for the electronic retailer, indicating that consumers aren't racing out to buy new flat screen TVs in the face of rising unemployment, tightening credit, and declining home prices.  Frankly, a bit of prudence is called for by the American consumer in these uncertain times and I am somewhat relieved that consumers are actually behaving rationally.  Unfortunately, from the retailers' perspective, this new reality is tough to swallow, for it indicates that many face a particularly difficult year and some, like Circuit City, will throw in the towel.  The shifting retail scene has negative implications for commercial real estate as well, as mall operators will be forced to confront lease cancellations and empty space they cannot fill.  General Growth Properties, a mall owner, warned on Monday that it was near default on several loans that mature before the end of the month.  As vacancies rise and lease rates fall, the most heavily indebted REITs will face serious difficulty refinancing their debt.  Make no mistake, tough times lie ahead.
Meanwhile, the government continues its frantic efforts to prop up the US economy by offering money to just about everything that moves:


1 comment:

maggie said...

I hope they do bail out the auto industry, so i can recover on my scheckles when I was certain that it couldn't go lower than 6.50 per share. D'oh. I still have faith...