Macro Matters!

'Yeah, macro might matter, but this industry has a mind of its own.'
That's the most common feedback we get as to why macro calls don't work in apparel/footwear.

As much conviction as we have in the disastrous secular outlook for softlines (see 5/5: This Ride Is Far From Over), we're getting even more concerned about where we are in the cycle. What? Getting MORE concerned after earnings tank and the stocks get clobbered?

Yes. And it's all about Asia. It's macro.

Since we've gone live with our portal, I've been having fun searching out relevant charts and pictures that help tell an investment-significant story. This time, I'm going to blatantly plagiarize from my colleague Keith, with whom I share real estate on this site. Check out the excerpt below from his morning comment posted early today (be sure to click on the image to enlarge it).

Here's a few other recent events worth considering...
* India inflation report came in at a 3 year high. Singh is prepping for '09 re-election with containing inflation as a key point on the agenda.
* BoJ reverted to a neutral stance in light of rising cost pressures.
* Pakistan/Philippines food crisis.
* Singapore Central bank guided down last week in terms of growth. Growth was 7.7% last year. Now guiding to 4.6%. Best case, by 2009 growth is cut in half.

So Asia, which has been the source of stimulus for increased per capita consumption in the US due to lower costs, is going to continue to take it on the chin. We've seen some of the cost inflation already, and we think that there's much more to come. But the double whammy comes when growth in Asia slows as well, and an important growth market for US brands eases.

Growth slowing AND margins contracting?

Scary.