The theme this week will not be that sales are getting better. No, the story this week will be that the sales decline MAY be slowing or lessening in severity. As we move into the first quarter, how individual companies differentiate themselves by handling their internal management, inventory and SG&A expenses--in other words, the basic administrative cost of doing business--will become increasingly more important.
Why? We all know that the consumer is weak. High oil and gas prices have been a seemingly perpetual headline for the past two years. Housing and mortgage market problems are also old news--California and Florida have been dragging on sales results for months.
I'm not saying that these factors count less (for a company like Nordstrom which has 25 percent of its stores in the state of California, regional weakness is a major influence on results.) Undoubtedly, these factors are what's driving or not driving spending right now. My point is that investors are now looking beyond the macro factors. They want to hear what each company is doing to cut back on costs going forward. For example, HD and Macy's already have laid off workers.
What will come from the Nordstromcall tonight and Macy'searnings conference call tomorrow? And another big question: Given the bounce back in retail stock prices despite declining sales, have we hit the bottom for these stocks?