I would say these folks are probably 20% of the population overall. BUT, i would also say it's the 20% that still spending and keeping the rest of folks employed. Is this a concept that's hard to grasp? Take a look at higher end retail like Sak or Tiffany and Co and compare that to lower end retail like Walmart over the past two quarters. Which did well, and which ended up eating sh*t?
Speak of the devil: the 20-80 Rule:
Merrill Lynch Downgrades Wal-Mart Stores to "Sell" – Reports
NEW YORK (AP) — Shares of Wal-Mart Stores Inc. fell after the opening bell Thursday after Merrill Lynch reportedly downgraded the world's largest retailer to "Sell."
The Dow Jones industrial average component was down 87 cents, or 2 percent, to $43.33 in morning trading.
According to multiple media reports, the brokerage cut its rating on the shares from "Neutral," citing concerns that profit margins are eroding at its U.S. stores as the economy slows. A Merrill spokeswoman would not confirm the rating change, and said they do not release their equity research to the media.
When it reported second-quarter results earlier this month, Bentonville, Ark.-based Wal-Mart cut its profit forecast for the full year. And when it released sales figures for July, the retailer posted a slim gain but warned that increased discounting is hurting profit margins.
Sears profit falls on discounts
NEW YORK (MarketWatch) — Sears Holdings Corp.'s second-quarter profit tumbled 40% after increased discounts at both its Sears and Kmart chains ate into profit margins.
Net income for the quarter ended Aug. 4 fell to $176 million, or $1.17 a share, from $294 million, or $1.88 a share, a year earlier. The year-ago profit included a gain of 14 cents a share from the settlement of a lawsuit.
Revenue including merchandise sales and services dropped 4.3% to $12.24 billion, the Hoffman Estates Ill.-based company
The company cut prices and increased other promotions after demand fell across most categories at both its Sears stores in the United States and Kmart locations. Sears, the biggest U.S. retailer of appliances, has unveiled "Ultimate Appliance Promise," a campaign to spur buying of refrigerators and other appliances, where sales have slowed due to the weak housing market.
Meanwhile….
Tiffany Sparkles With Latest Results
Whether they enjoy the jewelery is unknown, but traders sure do seem to appreciate Tiffany's stock.
Tiffany (nyse: TIF – news – people ) surprised Wall Street on Thursday morning with better-than-expected sales and pleased traders by upping its full-year forecast for sales and earnings.
For the period ended July 31, Tiffany said profits actually slipped 10%, falling to $37 million, or 26 cents per share, versus $41.1 million, or 29 cents per share in the year-ago period.
The company recorded a 17-cent-per-share charge related to the pending sale of its Little Switzerland business.
But sales jumped 19% to $662.6 million. U.S. retail sales, in particular, were up 20% to $345.3 million in the second-quarter. Same-store sales increased 17% in the quarter. Sales in the New York flagship store rose 31%, partly reflecting strong sales to foreign tourists spending money in Gotham.
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See a pattern here? People on tight income (characterized as your typical discount store shopper) are taking a huge hit. Specialty stores that typically cater to the upper income are actually doing well, if not better. 20-80 rule. The upper 20% of the income earners are still spending, and supporting the rest of the economy. You think if these 20% people get hit, that the remaining 80% will be in any better shape then they are now? I don't. It's going to hit them even harder.
