Publish date:

Kass: Retail's Bleed-Out Will Drown Us All

Last night's news from Target and Lowe's suggests a consumer-led recession.
Author:

This blog post originally appeared on RealMoney Silver on Sept. 25 at 7:51 a.m. EDT.

Economic and stock market bulls got another wakeup call.

After the close yesterday,

Target

(TGT) - Get Report

substantially lowered its September comp guidance from +4% to +6%, down to +1.5% to +2.5%, citing weakness in Florida and New York.

Target was supposed to be the retail box that would prove once and for all that the

spent-up, not pent-up

consumer thesis was merely a figment of the bearish crowd's collective imagination. Instead, last night's announcement reinforced the odds that a retail/consumer-led recession is increasingly likely.

The excuse given by economic and retail bulls has always been that

Wal-Mart's

(WMT) - Get Report

marketing was inferior and antiquated, and that its consistently weak comps were company-specific. Wal-Mart, the world's largest retailer, was said to be losing market share to Target.

Back in early September,

I suggested

TST Recommends

that investors should not believe the retail hype. Target's September same-store sales forecast reinforces that view -- and so does

Lowe's

(LOW) - Get Report

guidance, which was lowered as well after the close.

Remember, poor back-to-school sales usually correlate with a poor Christmas performance.

Retail will bleed red today and it won't rally in the days ahead.

As

mentioned

in yesterday's opening missive, the long arm of housing will weigh on the consumer, and so will higher energy prices, a

General Motors

(GM) - Get Report

strike, rising mortgage resets.

These and many other macroeconomic factors provide continual pressure on the retail outlook for some time to come.

At time of publication, Kass and/or his funds were short RTH, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.