Panic Hits The Retail Sector (WMT)(TGT)(AXP)(COF)

When an industry says it is in a state of disarray, investors may want to head for the hills. As the National Retail Federation began its annual meeting, one of its consultants Wendy Liebmann, chief executive of WSL Strategic Retail described the industry by saying "It’s anarchy," according to Reuters.

"Americans cannot control the big things such as oil prices, falling home values, mortgage costs and rising property taxes, so they want to control the small things," Liebmann said. "They are watching what they spend on everything."

True enough, so citizens are buying food and pet supplies while shying away from fashion, electronics, computers, and software. If this is true, retail is seeing a big change from the fourth quarter of last year when electronics and PC sales were relatively strong. That part of the cycle may have ended about the same time that American Express (AXP) and Capital One (COF) said that consumers suddenly ran out of money.

Observers at the big retail confab seem to think that the cutback in consumer spending will hurt Wal-Mart (WMT) and Target (TGT). But, there is not even anecdotal evidence that this is true. In reality, curtailed spending habits could help "big box" retailers because they are able to offer buyers substantial discounts on most products.

To put it briefly, there is a wide range of opinion about winners and losers in the retail industry because the number of sane heads examining the business has shrunk to near zero.

Douglas A. McIntyre