Skipping Over 2008
December 7, 2009-- Home Textiles Today,
Here's the news: 2008 no longer counts.
That's the distinct impression one gets these days listening to retailers and suppliers talking about current business compared to last year. Sure, on a P&L basis the comparisons are year-over-year. But as executives talk about the pace of sales (not to mention profits), it's 2007 they're now using as a benchmark. It would seem that when comps start matching or exceeding 2007 numbers, industry folk are going to feel like things are back to normal.
Is this realistic? How does this comport with "the new normal," the permanent shift in consumer spending habits retail consultants have told us will be the scenario even after the economy recovers?
From the vantage point of a scorching fourth quarter 2008 and a difficult 2009, the year 2007 may be remembered as pretty good. But 2007 was not as fat and sassy as memory may hold it to have been.
After feasting on houses and refinancing agreements and easy credit, consumers were already experiencing the first signs of heartburn in 2007.
It started with Holiday 2006, which lost steam as retailers cut prices to keep traffic humming. As HTT reported at the time, many retailers saw their December comps drop below November levels. Federated Department Stores (now Macy's Inc.) reported a 4.4% comp increase, but that was half the 8.5% jump it generated a month earlier. Target and Kohl's similarly lost ground compared to November.
Comps at Walmart U.S. rose just 1.3% while Dollar General posted a 7.1% increase.
What unfolded over the remainder of the year? Sales of new and existing homes slowed significantly. Mortgage rates — and foreclosures — began climbing. Gasoline prices skyrocketed, and non-essential consumer spending hit the wall.
We now know the recession began in December 2007. But in hindsight, the home furnishings business was steadily sliding into it for months.
If we are to slowly climb out of it in 2010, as many believe will be the case, pegging results against 2007 may prove apt after all.
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