PMIs look good but as for retail, the thrill is gone
Global markets are up as the HSBC "flash" manufacturing numbers in China came in at 50.1 -- a four month high. Anything above 50 indicates expansion.
Eurozone PMI also picked up more than expected, rising to 51.7 from 50.5 last month and the highest level since June 2011. Germany was particularly strong.
Yet despite all this, the damage continued to mount in several emerging market countries — including the Phillipines and Indonesia. The only outlier was in India, where the stock market managed to bounce.
After missing big and reporting same store sales down 10 percent, ANF added insult to injury. The company gave terrible guidance for the current quarter: 40-45 cents per share versus analyst consensus of $1.06 (!).
So just how grim is it in the young retail space? CEO Mike Jeffries on the conference call: "The reason for weakness is not entirely clear. While the consumer seems to be recovering, that is less true of the young population. Youth spending has likely diverted to other categories. We expect these effects will abate at some point. We're planning inventory and expenses on a conservative basis."
I know it's fashionable to say all of retail is terrible, but ANF is a particular problem: they are no longer an aspirational brand. Their core customer has moved on. They want other brands like Michael Kors, Urban Outfitters, Ralph Lauren, Fossil and even Kate Spade. ANF has had 50 percent off sales, on and off, for five years, and you can buy jeans for $25 on sale at Hollister. That is hardly aspirational.
The company has declined to provide any further guidance beyond the third quarter "due to a lack of visibility given recent traffic trends." Yikes!
To the rest of the world, it may seem like young adults are spending money on only two things: footwear and smart phones.
Well, perhaps they're buying one more thing: video games. Gamestop just crushed their results, selling used games, new games and consoles. Not to be outdone, Sony and Microsoft both have a new generation of consoles. Gamestop is selling huge pre-orders for both of them. Plus there are a lot of new games coming out, such as a new Grand Theft Auto, with a lot of pre-orders. Finally, the used game business is still doing well. They sell a lot of them.
2) Is there anything good you can say about retail? Children's Place had a decent quarter, with a loss not as bad as expected. Meanwhile, teen apparel purveyor The Buckle was in-line, while TJX had a good quarter. That's about it.
3) Lost in the Sears earnings release was this interesting tidbit: Sears is mostly a membership organization. The "Our Shop Your Way" membership program generates 65 percent of revenues at Sears Domestic and Kmart. You get points based on how much you spend. The points are redeemable at the stores.
—By CNBC's Bob Pisani