Sometimes better isn't good enough. Despite signs that
consumers are becoming a wee bit more confident, it looks
like retailers are well aware that many people will still be
strapped for cash in the upcoming holiday shopping season.
Privately held Toys "R" Us is the latest major retailer to
offer layaway programs for big-ticket items.
According to the Associated Press, the toy retailer, which
has to compete with the likes of
Amazon.com (Nasdaq: AMZN),
Wal-Mart (NYSE: WMT),
Costco (Nasdaq: COST), and
Target (Nasdaq: TGT), has announced that
it'll immediately begin offering layaway for pricier items
such as bicycles and cribs.
Layaway programs -- in which shoppers have a retailer hold
an item while they pay for it over time -- had become an
anachronism during the bubble times of easy credit. Thanks to
Visa (NYSE: V) and
MasterCard (NYSE: MC), consumers could use
their credit cards to bring home items right away, rather
than waiting to come up with cash in full. However,
layaway made a comeback last yearat
Sears Holdings (Nasdaq: SHLD), as consumer
credit tightened.
Even more interestingly -- and disturbingly -- Sears
Holdings reported that during the recent back-to-school
season, many shoppers at its Kmart stores were putting
simple, cheap items like pens, markers, or notebooks on
layaway. Apparently, many peoples' budgets remain seriously
constrained, which means investors need to
choose their retail stocks carefully.
Need further
grim tidings for the holiday season? Continued consumer
indebtedness and the high rate of unemployment remain serious
drags on the retail landscape. Worse yet, many retailers
recently indicated that they plan to hire fewer temporary
employees for the upcoming shopping season.
Never forget how crucial the holidays are for retailers;
they usually rake in the most sales at the end of the year,
which helps many retailers go into the black for the first
time in their fiscal years. With this year's holidays looking
unusually lean, investors should take a hard look at their
portfolios, purging weak retailers with high levels of debt
and consistently dwindling sales. It's quite possible that
only the strong will survive the next few months. Layaway's
return is just another sign of the times.
This article was originally published as
Holiday Trouble Lurks on Layawayon
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