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Retailers and Restaurants Weak on Consumer Concerns

Is it Time to Dump Retail?
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Retailers: time to take something off the table? The S&P Retail Index hit an historic high yesterday. An historic high.

Yet retailers are weak Tuesday. Gap, in particular down over 7 percent. Huh?

According to traders, one firm, Nomura, has been cautious on Gap due to competition concerns, specifically that Kohls high inventory level will cause them to be very aggressive with promotions.

But there's a bigger problem for retailers.

November same store sales, out last Thursday, were way below expectations, and the concern is that Hurricane Sandy is not the only issue:

1) there has been very little short interesting retail; that appears to be changing now;

2) the weather is unseasonably warm, not good news for apparel;

3) Q1 of 2013 will have very tough comparable sales for retailers, because Q1 of 2012 was very strong due partly to warm weather;

4) the consumer is a little more problematic;casual dining trends have weakened somewhat, as highlighted by Darden,owner of Red Lobster, cutting its guidance for the year, specifically saying they were "retooling the promotional calendars...to ensure they better fit consumers' current financial realities and expectations."

We should get more information shortly...we have analyst days this week for Starbucks, YUM! and Lowe's.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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