Get PJ Media on your Apple

The Late, Great American Shopper

What's good for Best Buy isn't necessarily good for America.

by
Stephen Green

Bio

March 3, 2014 - 12:02 am
Page 1 of 2  Next ->   View as Single Page

best_buy_tombstone_3-2-14

Best Buy shares surged last week on news that the troubled big box electronics retailer managed to turn a profit last quarter despite weak holiday sales. Sure, $293 million might not seem like big bucks when a Wall Street titan like Warren Buffett is busy setting an annual record return of $19.5 billion (up about 25% from 2012) — but it’s not bad for a company many had written off not too long ago.

Or is it?

Best Buy’s sales were actually down a bit from the same quarter the previous year, indicating that the newly private company has been cutting its way to prosperity. While cutting workers and closing stores have bought BBY some breathing room, that’s hardly a sustainable business model.

Growth is the key to sustainability, and that’s where Best Buy — a microcosm of the New Normal if there is one — is faltering. Consumer spending is 70% of the U.S. economy, and even as we prepare to enter our sixth year of recovery, the American consumer remains tapped out. Meanwhile, the party on Wall Street makes The Wolf of Wall Street look like a quiet afternoon with the ladies who lunch.

The problem faced by those of us who aren’t on the receiving end of the Fed’s largess — I mean “quantitative easing” — is best summed up by William Briat in a recent piece for Yahoo Finance. Briat writes that weak retail sales can’t be blamed on bad weather:

The biggest declines in the retail sector were from motor vehicle and parts dealers (-2.1%); sporting goods, hobby, book, and music stores (-1.5%); department stores (-1.5%); and clothing and clothing accessories stores (-0.9%). These four industries are more representative of discretionary spending than essential services, like food.

Having said that, at the other end of the spectrum, essential retail sector services, like food and beverage stores (which include grocery store stocks) and gas stations, experienced month-over-month increases.

If weather was to blame for weak retail sector sales in January, I would expect to see retail sector sales to be down in all areas that rely on foot traffic. But that’s not what we’re seeing.

“After all,” Briat adds, “if you have the money and need a car or TV, you’ll get one.”

Comments are closed.

Top Rated Comments   
"Outsourcing is merely a statist term invented to blame capitalism for the problems created by statist intervention that supposedly creates "fairness"."

Yes. First we drive jobs offshore through regulation and taxation and then we condemn the capitalist for greed and "outsourcing". Works well with the dimwitted.
25 weeks ago
25 weeks ago Link To Comment
A good and timely post, Steve! Betina, Charles and Branding Iron are correct as well.

I could start a new business, but if I don't have to do so financially why would I? I could expand an existing business, but if I don't have to to meet my needs, why would I? I could add employees, but if I don't need them why would I?

I listened when he said "...at some point you've made enough money." and "...you didn't build that." That was deep insight into the man's thinking and into the future actions of the people in his circle. What I heard when I was listening is that it was a great time to pull back, to not expand and to not feed Leviathan. I was/am not alone.
25 weeks ago
25 weeks ago Link To Comment
Either you miss the point or intentionally wander off in a neo - statist direction to distract from the issue accurately described in the piece. Obama and his Alinskyites are dismantling the capitalist system via enlisting cronies who will gladly surrender virtue in the quest to disable others and empower themselves. Meanwhile, real America is forced to endure artificially higher costs in daily consumables while the entire economic system crumbles in reduced activity as a result. Outsourcing is merely a statist term invented to blame capitalism for the problems created by statist intervention that supposedly creates "fairness".
25 weeks ago
25 weeks ago Link To Comment
All Comments   (19)
All Comments   (19)
Sort: Newest Oldest Top Rated
Consumer spending is 70% of the U.S. economy, and even as we prepare to enter our sixth year of recovery, the American consumer remains tapped out.

I was kind of expecting you to put quotes around the word "recovery"...
25 weeks ago
25 weeks ago Link To Comment
There's a song from flyover country explaining this phenomenon.

Josh Grinder and Kelley Mickwee - The Price of a Dream
http://troubadourtx.com/blog/joshgrider-and-kelley-mickwee-of-thetrishasmusic-the-price-of-a-dream-on-rlifermusic/

Consumers can't afford to buy more stuff from Best Buy because they've already used up their available income opportunities, time, and credit trying to keep what they already have. Economic growth will have to come from something else besides more consumer spending.
25 weeks ago
25 weeks ago Link To Comment
American production jobs moved overseas.
--> Cheaper products, but no job to pay for them.
Anyone surprised by this causal relationship needs to stand in the unemployment line for a few weeks.
25 weeks ago
25 weeks ago Link To Comment
We have truly reverted to the 16th century where the aristocracy governs and destroys the hopes and wealth of the peasants.
25 weeks ago
25 weeks ago Link To Comment
Such a shock that Warren Buffet has played ball with the Dems and finds himself with record profits...
25 weeks ago
25 weeks ago Link To Comment
You mean the same Warren Buffett that most of us once admired but learned later that he was nothing more than an opportunistic and greedy traitor (not trader) who, apparently, would sell his native country to the highest bidder?

That Warren Buffett?
25 weeks ago
25 weeks ago Link To Comment
Left out the part about not paying his taxes.
25 weeks ago
25 weeks ago Link To Comment
There is still a market for a shopping experience but it is never going to be what it was.
25 weeks ago
25 weeks ago Link To Comment
The internet changed all that. In the case of many items you see in the store, you can find it online for a better price.
25 weeks ago
25 weeks ago Link To Comment
A good and timely post, Steve! Betina, Charles and Branding Iron are correct as well.

I could start a new business, but if I don't have to do so financially why would I? I could expand an existing business, but if I don't have to to meet my needs, why would I? I could add employees, but if I don't need them why would I?

I listened when he said "...at some point you've made enough money." and "...you didn't build that." That was deep insight into the man's thinking and into the future actions of the people in his circle. What I heard when I was listening is that it was a great time to pull back, to not expand and to not feed Leviathan. I was/am not alone.
25 weeks ago
25 weeks ago Link To Comment
If demographics is destiny then a whole lot of shopping isn't going to take place for a long time. The largest segment of the population is aging and they are "downsizing" - getting rid of stuff. They aren't buying like they used to because they have a lot of "stuff". I see it all the time. And the younger generation has debts galore so they won't be shopping to they drop either. There is a paradigm shift about consumption taking place, the products that will matter and who will be buying them. To cling to what worked and what appealed for so long isn't going to work any more. Plus the type of immigrant we allow to become American will make a difference as well.
25 weeks ago
25 weeks ago Link To Comment
Betina, you have expressed what is really happening with a large segment of the population especially with those 50 and over. I am doing the same thing, downsizing, and lots more of us older boomers are doing the same thing. We just simply don't need all the stuff and big houses we have. Hopefully the younger generation can profit by using our used stuff like many of us did back in the 60's and 70's.
25 weeks ago
25 weeks ago Link To Comment
"gas prices jumped an average of 17 cents in the last three weeks, an increase of 5%. That looks great for overall retail sales, which reflect the increased costs for filling our tanks."

What it probably reflects is millions of Americans fillling the tanks of their portable generators when the bad winter caused power outages.

That's one exception to the inelasticity of demand for gasoline. Demand surges in natural disasters.
25 weeks ago
25 weeks ago Link To Comment
People want to work. Investors want something better than 1% on their money. What is preventing workers and investors from joining forces to grow the economy, creating jobs and profits? If you look quarter to quarter some kind of unexpected shock can disrupt the process, but we are more than five years past the shock. This is the Obama economy, paralyzed by regulation, taxes, and growing incentives for not working. The path to profits is manipulating the government. Actions taken and actions that might be taken increase the risks of any business proposition.
25 weeks ago
25 weeks ago Link To Comment
Those days are over.

Wall Street has made quite a bit of money, reflecting the increased earnings of businesses.

But today, unlike 30 years ago, increased profits do NOT translate into more jobs for Americans. Increased profits translate into more jobs for robots and foreigners.

We live in a globalized, automated world economy now. American businesses can make lots of money without hiring many American workers. Provide more incentives to American businesses and they'll just outsource more jobs.

We can't just do what FDR did or what Reagan did and expect comparable results this time. What we really need are programs to make the American worker more marketable. The American worker has to show that he provides value that his boss can't get from a Chinaman or an Indian or a Filipino.

25 weeks ago
25 weeks ago Link To Comment
Either you miss the point or intentionally wander off in a neo - statist direction to distract from the issue accurately described in the piece. Obama and his Alinskyites are dismantling the capitalist system via enlisting cronies who will gladly surrender virtue in the quest to disable others and empower themselves. Meanwhile, real America is forced to endure artificially higher costs in daily consumables while the entire economic system crumbles in reduced activity as a result. Outsourcing is merely a statist term invented to blame capitalism for the problems created by statist intervention that supposedly creates "fairness".
25 weeks ago
25 weeks ago Link To Comment
They used to call that fascism but the word is out of favor.
25 weeks ago
25 weeks ago Link To Comment
"Outsourcing is merely a statist term invented to blame capitalism for the problems created by statist intervention that supposedly creates "fairness"."

Yes. First we drive jobs offshore through regulation and taxation and then we condemn the capitalist for greed and "outsourcing". Works well with the dimwitted.
25 weeks ago
25 weeks ago Link To Comment
1 2 Next View All