So this next chart should come as no surprise to you.

This is a chart of Personal Consumption Expenditures dating back to 1959 which was taken from Merrill Lynch (after being pointed out to me by Barry Ritzholtz).

As you can see, we have never once seen personal spending drop as dramatically as it has over the past year. It’s no wonder yearly sales in the auto market have been nearly halved… Starbucks is no longer planning to be on every corner (and in every bathroom)… and Circuit City went bankrupt and liquidated.

THIS IS UNPRECEDENTED.

It also means that other companies which rely on amped up consumer spending are likely to continue seeing tougher days ahead.

Best Buy (NYSE:BBY) I’m looking at you. Because the truth is, anyone can buy what’s at Best Buy for much less money if they simply go to Amazon.com or even walk into their friendly, neighborhood Wal-mart.

Hell, even Target (TGT) is starting to show more spunk when it comes to consumer electronics.

While I’m not saying Best Buy is a goner, they’re going to continue having a tough time in the next two years. Making them a great long-term  short candidate.

This begs the question, why would Circuit City want to emerge from bankruptcy? Best Buy is entrenched as the leader in the consumer electronics segment. Wal-Mart, which now carries name brand HD televisions at lower prices than Circuit City, is taking market share. Consumer spending on ‘luxuries’, such as big screen televisions has collapsed with the tightening credit markets.

How about the customer experience? When I recently went into a Circuit City store on a Saturday afternoon looking for an Ethernet cable, finding a sales associate was impossible. When I finally did locate one, they had no idea where to find the cable I needed. On top of that, I was one of perhaps a dozen customers in the entire store.

The cause of this poor experience is probably due to Circuit City laying-off approximately 3,400 sales associates last year and replacing them with lower paid workers. From my standpoint, and I am sure many others who have been to Circuit City lately, it is terrible shopping there. This doesn’t bode well going into the holiday season when retailers look for a boost in sales numbers.

I think perhaps it is time for Circuit City to call it a day and just cease operations. To re-emerge from bankruptcy in what is likely to be a continued economic slowdown and still facing eroding market share seems like a recipe for failure. There’s nothing wrong with knowing when to say when.

Source: Knowing When to Say When