The Summer of Disconnect
June 9, 2011,
Now, indeed, is the summer our disconnect.
For the second straight year, we have pinned all our hopes on the back half of the year, starting with the summer months, to save our collective economic butts and salvage yet another tough fiscal situation. But for the second straight year, it's looking increasingly like that may not happen. There is an enormous disconnect in the marketplace between reality and perception, between sales and profits and between the haves and the have-nots.
The summer of 2011 is shaping up to be a doozy in oh so many ways.
Disconnect No. 1: Let's start with cotton and raw material prices, because that's pretty much where any conversation in the valley of sheets and towels starts these days. Cotton prices are down - way down, in fact - from the insane highs they were hitting early this year, coincidentally right around the spring buying season.
That's good ... but not really. Many orders for the second half of the year were placed at those record high levels and now, everyone up and down the food chain is fighting it out on who gets to save a few bucks. It's not pretty.
And let's not forget that while cotton is as much as 50 cents a pound cheaper than it was just three months ago, it is still probably 80 cents a pound more expensive than it was two years ago. Where cotton goes next as the world starts to prepare for the fall crop to come in is anybody's guess.
Disconnect No. 2: If you look at retail sales numbers and then talk to vendors about their sales to those retailers, you get the feeling that you are living in two parallel universes. Store comps for the first four or five months of 2011 have been pretty decent. Some stores, like Macy's, are very decent. Some, like Walmart, are not so decent, but we are not seeing the double digit drops we saw during the worst of the 2008 meltdown. Retail is doing OK.
Vendors, on the other hand, are moaning and groaning as never before. They continue to bitch about slow ordering, no ordering and basically lame business conditions. They are not just complaining about not making any money, they are saying there's no business to be had at all.
Disconnect No. 3: When it comes to the housing market, if you don't like the latest statistical report that just came out, don't worry, there's another - usually contradictory - one right behind it. We all know the housing market is not what it used to be (if in fact it ever was that in the first place), but exactly where it has settled back into it is largely an exercise in subjectivity.
Every time a report comes out saying the market has bottomed out and is starting to inch back up, there's another one directly behind it saying there's plenty more downside left to go.
Old Billy Shakespeare talked about the glorious times ahead. Obviously he was not in the home textiles business.
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