Why There's Pressure On Consumers

Two companies today are illustrative of the Consumer Under Pressure: Whole Foods and CarMax.

1) Consumers are cutting back on higher-end food purchases. Whole Foodsreported earnings well below expectations (about 30 percent below expectations); it's no surprise that consumers are cutting back purchases at higher-end stores like Whole Foods, but the decline is even greater than expected. And no, you cannot blame all their problems on the Wild Oats purchase, which has been expensive and dilutive. They have suspended their dividend and cut back on store growth, both prudent measures to preserve capital. Down 15 percent to a 6-year low.

2) Used car sales are down, and it's not just because of the "bad mix" of no demand for gas guzzlers and high demand for fuel efficient cars. How bad was it? CarMax said they saw used unit comp sales down 17 percent in June and July; according to RBC Capital, the worst prior quarter they could find was down 7 percent. Besides fewer people trading in their cars, vehicle prices are falling, and this is pressuring sales as the company is being forced to liquidate inventory at prices below estimates. Down 6 percent.

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