Speaking of Out-of-Stocks

Following up on the Oprah/KFC post below, I saw a few articles this week saying, in various forms that the recession may be ending, or at least hitting bottom. I sure hope it’s true. For example, here is Rupert Murdoch's opinion:

News Corp. Chairman Rupert Murdoch, commenting on the most severe worldwide economic downturn in decades, said Wednesday that "it is increasingly clear that the worst is over." Speaking to analysts on a conference call, Murdoch said: "There are emerging signs in some of our businesses that the days of precipitous declines are done and that revenues are beginning to look healthier."

And Walgreen's boss seems to agree:

"Most of us think the worst case scenario we did in our planning is probably off the table," Mr. Wasson said in an interview with Wall Street Journal reporters and editors on Thursday.

Mr. Wasson, chief executive of the Deerfield, Il., pharmacy chain, said sales seemed to have bottomed in January and began to inch up in March and April.

Which is all very nice, but at the same time, we see this article:

You can't sell the nation's retailers on the idea that the economy will rebound soon.

Despite some economists' forecasts that the recession could be over by the end of summer, industry watchers say merchants are betting that it's going to be 12 to 18 months before consumer spending gets even close to pre-recession levels.

The article goes on to note that as a result of their pessimism, retailers are keeping their stocks very lean:

Merchants have dramatically slashed their orders for new merchandise that they expect to sell in the summer and later this year.

One sign of that, February's volume of retail imports -- such as clothes, shoes and home furnishings -- dropped to the lowest level in seven years, according to the latest Port Tracker report from the National Retail Federation (NRF) and forecasting firm Global Insight.

Import volume for March is expected to be down 19.7% from a year earlier, with April 22% lower, the report said.

Of course one question is whether there can be a recovery if retailers aren’t buying, which could make the retailers’ viewpoint a self-fulfilling prophesy. But if the economists (and Murdoch and the Walgreen’s CEO) are right, then there are going to be a lot of empty shelves and a lot of lost sales. Retailers who got burned on the downslide with excess inventory and huge markdowns, could get burned again.