Black, and Blue, Friday: Landfill Scavangers at Saks

Much will be written about “Black Friday”—the busiest shopping day of the year, when most retailers start to coin money—and in fact much already has been written.

So we’re not going to blather about the numbers here, which look “better than feared,” to quote the most over-used phrase we’ve seen in the press all weekend.

But having watched the retail business for more than a couple of business cycles, we’ll offer what we saw happening. And what we saw was a continuation of the Great Leverage Unwind.

Now, for starters, it is extremely dangerous, investment research-wise, to walk into a store and ask the nearest clerk “How’s business?”

Most likely you’re talking to an hourly employee who’s been working at the place less than a year. As such, they don’t think in terms of “year over year same-store sales.” They think in terms of “today” versus “yesterday.” Or even “now” versus “this morning.”

So chances are they’ll tell you things are really busy if they happen to be really busy at the moment; and really slow if they happen to be really slow.

Also, a store can be packed or not based on the time of day, or the day of the week, not to mention its proximity to the holidays, as well as whatever the regional economy is doing.

But by visiting the same stores at the same time of day at the same time of year, you can take the pulse of what’s happening to a reasonable degree.

And the pulse we took over the weekend was like nothing in years.

Saks—the Fifth Avenue Saks—looked like Filene’s Basement the day before Thanksgiving, with 30-40-50% off signs everywhere, and women rifling through stacks of relatively inexpensive scarves and other accessories with the hunted look of landfill scavengers.

Indeed, all New York City seemed to be on sale—and full of shoppers looking for a sale. Our old pal Mustafa—we used to have breakfast at his place every morning—said the restaurant business has been horrible. He motioned out the window at the crowds standing by the Rockefeller Center skating rink: “Look, nobody there!” And indeed the crowds did look thin.

This is no doubt due to the rising dollar—and falling world stock markets. Unlike years past, we heard fewer accents on the streets of New York City, particularly Eastern European voices. And this is killing high-end retail. One extremely upscale store that’s been packing ‘em in the last few Bubble years was so empty on Saturday afternoon you could have shot the proverbial cannon through it and not hit a customer, although you would have taken out plenty of “For Sale” signs.

The place felt like a Tuesday morning in June, not the day after Black Friday.

Moving to another side of the country, we found that the airports, too, were dead. And not just on the inside, but on the outside, too: we had a hard time driving out of the Hertz rental lot in San Francisco owing to an unusually high number of cars parked everywhere.

Where’d the customers all go? Simple, they traded down. So it was Black Friday for some retailers, but quite Blue for others.

The Great Unwind continues.

Jeff Matthews I Am Not Making This Up © 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.