The consumer is tapped out. After consistent 25 basis point increases to the Federal Funds Rate, we are finally starting to see the effects on the stock market.
Yesterday morning we saw three headlines that caught my attention. The first detailed Sears’ guidance for this quarter – a reduction from $2.12 to from $1.06 to $1.32 per share. These revisions are, at best, a 30% reduction and, at worst, a 50% reduction from their previous optimistic estimates.
Notably, declines were across all categories. If you follow the theory that the consumer is on thin ice, then it is hardly surprising to find big ticket items are not being purchased. Sears is having trouble selling new stainless steel fridges and widescreen TVs because consumers do not feel confident about their financial situation. The only sector that wasn’t hit as hard was women’s apparel and footwear – suggesting stressed housewives may be engaging in retail therapy.
