What's So Happy About the New Year?
Wow, it really did not take long for the good feelings surrounding the holidays to disappear and be replaced with cynicism and pessimism, did it? Now, we are simply left with crappy weather, excess body weight and four month until Easter, which we all know is an inferior holiday anyway. Roll on the summer.
To hammer the point home, Zerohedge  is pointing out that retailers are facing an unwanted record in the shape of the number of holiday gifts returned.
Personally, I have never been one for taking gifts back. I believe it is against the spirit of the holiday to take back that ugly sweater and put the funds towards the latest Call of Duty game. Alas, as a result, I have a bottom dresser drawer full of bad clothes that, every couple of years or so, goes in a charity bag.
Apparently, I am in the minority. According to Zerohedge writer Tyler Durden, “We have heard more than enough about both the "resiliency" of holiday spending and the resurgence of the US consumer as shopping supposedly surprised in the past several months (on nothing else than as Bridgewater's Prince indicated was merely the exhaustion of consumer savings). Now we get the confirmation that this was nothing but a prelude to a tsunami of retail returns as "shoppers" push to complete the other side of the transaction, whereby retailers part with the just received cash, leaving them with even greater inventories, and even thinner margins.”
Reuters reported that, “With a Christmas season that has seen record e-commerce sales coming to a close, returns should hit an all-time high on Tuesday for United Parcel Service.”
It does seem a little cruel to retailers to dangle the carrot of holiday earnings in their faces, and then rip it away in the shape of a season of returns. An anti-Christmas, if you will.
Reuters  elaborates, “[UPS] expects to handle more than 550,000 returns on Tuesday, a record, and up almost 8 percent from a year earlier. Several other days during the first week of 2012 will also top half a million returns, UPS said. "This will definitely be the busiest year for returns," Ken Burkeen, marketing director of the retail and consumer products division at UPS, told Reuters.”
Online giants like Amazon  (NASDAQ: AMZN ) are not exempt to the retailer fear-fest. “Aeverla top electronics retailers, including Amazon.com, Best Buy  (NYSE: BBY ) and Apple  (NASDAQ: AAPL ), have extended their normal return windows to accommodate the large number of people who will need to initiate returns or refunds over the next few weeks, according to STELLAService, which rates the customer service of the largest retail websites.”
Of course, returning unwanted gifts is nothing new. There is a reason that the concept of a gift receipt was born years ago. But this year, when people have little-to-no disposable income, a bad holiday sweater or an electronic device that will not get used does not seem quite so cheery. There are bills to pay, groceries to buy, and the money from the returned item will be useful.
Traders who believe that the retailers will not take a hit due to gift returns might want to consider the following trades:
- Amazon is a favorite point of purchase for many gift-buyers and, even if they do receive a lot of returns, they should have had a decent holiday period.
- Apple will have seen a lot of products bought for gifts. How many of those get returned remains to be seen.
Traders who believe that January will be a bad month for retailers may consider alternative positions:
- Look at any postal services. They will get a lot of use.
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