The upcoming holiday season doesn't look promising, either
for retailers or the consumers to whom they cater. Depressed
temporary hiring in a ho-hum consumer spending environment,
especially with many shoppers out of work, may create a
self-fulfilling prophecy of a depressing holiday season.
Of the 25 biggest retail chains, about 40% plan on hiring
between 5% and 25%
fewertemporary employees this holiday season,
according to a Hay Group survey as reported by
The Wall Street Journal.That's worse than last year,
when only 29% of the retail firms surveyed said they planned
fewer hires. And these proposed cuts come on top of cuts
already made at retailers in order to boost margins.
Among those companies surveyed were
Best Buy (NYSE: BBY),
American Eagle Outfitters (NYSE: AEO), and
Saks (NYSE: SKS). Firms planning to increase
the number of temporary workers include
Macy's (NYSE: M) and
J.C. Penney (NYSE: JCP), but there have also
been plenty of rumblings about at-risk retailers. Macy's in
particular was recently marked for death by risk-modeling
firm Audit Integrity. So was
Rite-Aid (NYSE: RAD), which just today
reported yet another dismal quarter.
The Federal Reserve may have recently talked positively
about the economy picking up a bit, but make no mistake, a
"jobless recovery" is no walk in the park. The unemployment
rate is still at historic highs. Consumer spending still
represents some 70% of GDP, and many jobless consumers will
find it more difficult to even find temporary jobs. Normally,
the end-of-year holidays provide about 700,000 temporary
jobs. If, as predicted, retailers reduce their holiday hiring
by 10% to 20%, that could represent 100,000 fewer jobs this
year.
This lack of hiring may hurt retailers' sales, too.
Employed retail workers are more likely to shop, especially
with employee discounts. On the other hand, given the
prospect of flagging sales, retailers shouldn't overhire in
light of expected demand; they need to keep costs down.
The holiday quarter is very important to retailers, and
this year's holiday will certainly break some of the weaker
names. Make sure your portfolio only includes the strongest
retailers, especially those that aren't overly indebted or
second-string players. That means focusing on the
Wal-Mart s (NYSE: WMT) and avoiding the
Abercrombie and Fitch es. Otherwise,
retail could raze your portfolioafter this gloomy holiday
season plays itself out.
This article was originally published as
Grim Tidings for the Holidays?on
Fool.com
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