The Late, Great American Shopper


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."