Check out the latest outlook on October sales at U.S. retailers.

While most industry experts expect a 1.2 percent rise thanks to the weather gods and easy comparisons, the forecast doesn’t really say it all.

For instance, while sales trends have improved from a disastrous October 2008, data on the economy and consumer spending gives mixed signals and indicates shoppers remain cautious.

News of the U.S. economy returning to growth may have renewed some hopes of a revival in spending late last week, but the Commerce Department talked about consumer spending falling 0.5 percent in September.

It may be too early to raise hopes based on expectations for October.  One thing is certain — the future is unclear.

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(Reuters photo)

Americans may have become more confident in the economy but they haven’t started spending heavily again — and that could be bad new for retailers this holiday season.

Discover’s U.S. Spending Monitor for September rose for the second straight month, climbing 2 points to 89 (based out of 100).  Thirty-three percent of respondents said they felt economic conditions were improving, a Monitor high and a 2-point rise from August.

When asked to rate their own financial fitness, 33 percent rated it as good or excellent, up a point from August and the highest percentage in four months. On the flipside, 48 percent said their finances were getting worse, also up a point from the previous month.

Consumers’ spending intentions remained flat.  Many industry watchers have said that the recession has created a “new normal” characterized by a more frugal lifestyle and fewer shopping sprees. Even those people who have remained financially secure, and are not among the 9.8 percent of Americans who are unemployed, have reset spending habits.

To that end, WSL Strategic Retail said that only 17 percent of shoppers plan to go back to shopping the way they used to.

“There appears to be no indication consumers are willing to increase their spending, despite a Monitor-high number of them who feel the economy is getting better,” said Julie Loeger, senior vice president of brand and product management for Discover.
 
That could cause headaches for retailers, who are hoping that consumers will start shopping again heading into the all-important holiday season.
 
For the sixth consecutive month, less than half of consumers said that they expected to have money left over after paying monthly bills.
 
One bright spot, if you could call it that, is that only 43 percent of respondents felt economic conditions are getting worse. Forty-six percent felt that way in August. 

(Photo/Reuters)

Check out analysts’ calls on middle and upper income shoppers.

Thursday’s sales reports showed that some consumers have started to buy their little luxuries again, a trend retail industry experts say is crucial for sales to rebound this fall and winter.

Michael Koskuba, Portfolio Manager for Victory Capital Management’s Victory Large Gap Growth Fund, recommended that investors look into discount names with a discretionary bent, such as Target, which he owns in his fund.

“We thought, well, if things do start to improve they’ll be a beneficiary of that, and clearly we’ve seen the outperformance in the stocks,” Koskuba said of Target shares compared with those of Wal-Mart Stores Inc so far this year.

“The discounters in general, especially the ones that do have the discretionary component to them, I think are the one that will continue to do well,” he said, citing companies such as Target and off-price retailer TJX.  “I think those are sort of the areas that investors should be focusing on.”

Still, low-income consumers alone cannot ensure a retail recovery.

“While we believe market share gains for the discounters are likely to persist as the consumer remains focused on value and as the savings rate remains elevated relative to recent years, we are more positively disposed toward retailers in our coverage addressing the middle-to-upper-income consumer,” said William Blair analyst Mark Miller.

Michael Niemira, chief economist of the International Council of Shopping Centers, said he noticed encouraging trends in Thursday’s reports, such as Costco selling more televisions (albeit at a lower average price).

“You say, well, TV sales are deferrable, but that’s a discretionary purchase.  So there’s something beneath the surface that is, I think, a little bit more positive,” Niemira said. 

He expects a broader group of retailers to start posting positive sales results by the end of the year, and not just because they face easy comparisons since the end of 2008 was so abysmal.

“Even luxury will be participating in that,” Niemira said.  “I don’t think you can have a sustained consumer recovery without the luxury component strengthening.”

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(Reuters photo)

After a much heralded “shift to thrift” during what has become the longest and deepest recession since the Great Depression, diners are now saying they plan to spend less money at cheap fast-food chains and more at some pricier eateries like Darden’s Red Lobster and Olive Garden chains, Chipotle and Maggiano’s Little Italy from Brinker. 

“Trading up is supported by fewer customers saying they’re ordering less expensive items, skipping beverages and choosing less expensive restaurants,” RBC Capital Markets analyst Larry Miller wrote in a client note. Miller regularly polls diners about their spending plans. 

“Confidence in the economy is improving and those planning to spend more at restaurants cited better job security and less need to save money,” said Miller, who added that consumer spending plans at Starbucks were also ”less bad.”

Are you trading up on food — or anything else — after trading down?

While more consumers feel better about the economy, they are not getting back to their spending ways, according to a survey released on Wednesday.

Discover’s U.S. Spending Monitor for August showed a rebound, with results rising to 87 (out of 100) from July’s 83.5.
 
A whopping 21 percent felt economic conditions were improving, marking a high for the monitor and up 7 points from July.  And, just over 21 percent felt their own finances were shaping up, marking the highest number reported since August 2008 (aka the month before the Lehman bankruptcy frazzled the markets).

Still, for the third month in a row, over 50 percent of respondents said they plan to cut discretionary personal spending in the month ahead.

Where is the money going?  Many seem to be putting it in the bank.  The percentage of consumers planning to save and invest the same amount or more in the month ahead shot up to 58 percent, 3 points higher than July.
 
“The rise in the stock market and stable gas prices may have given consumers a reason to believe things are improving and the ability to save and invest more,” said Julie Loeger, senior vice president of brand and product development for Discover.  ”But improved economic and financial attitudes has not translated into increased consumer spending, a cause for concern for retailers counting on revenue from back-to-school shopping and as the holiday shopping season approaches.”
 
Still, just 46 percent reported having money left over in August after paying their monthly bills, a Monitor-low and 5 points lower than a year ago.  Even 22 percent of those who had money to spare have less of it.  That’s up 3 points from July and the highest level since December.

Want a bit of good news?  Only 46 percent of consumers felt economic conditions were getting worse.  That’s down 6 points from July and is also a Monitor-low.  In August 2008,  65 percent of consumers felt economic conditions were getting worse.  Also, 46 percent said they felt their own finances were heading south.  That’s a 5 point improvement from July and the lowest it has been since December 2007.

(Reuters photo)

Check out some shoppers saving for holiday gifts.

Yes, it is still summer, but a comparison shopping Web site decided to find out how recession-weary shoppers feel about spending for the upcoming winter holidays.
 
Just over 75 percent of respondents to PriceGrabber.com’s recent survey said they are more concerned about the cost of holiday gift-giving this year.  So, how many are starting to save earlier?  Only 41.1 percent.

Here’s a quick breakdown of the survey from PriceGrabber.com:
 
Compared to the 2008 holiday season, are you more concerned about the cost of holiday gift-giving this year because of the recession?
 
35.2% Yes, I am highly concerned
40.1% Yes, I am moderately concerned
24.7% No, I am not at all concerned
 
Are you planning to start saving money for holiday gift-giving earlier than last year because of the recession?

41.1% Yes, I am planning to start saving money earlier than last year
20.9% No, I am planning to start saving money at the same time as last year
2.2% No, I am planning to start saving money later than last year
35.8% No, I do not save money for holiday gift-giving
 
When do you expect to start saving money for holiday gift-giving for the 2009 holiday season?
 
17.4% July
15.2% August
15.3% September
9.7% October
5.7% November
0.9% December

And, the group with the largest number of responses to that question — 35.8% — said they do not save money for holiday gift-giving.
 
The survey of 1,777 online consumers was conducted July 20 to Aug. 10.

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(Reuters photo)

Check out all the earnings in the consumer world.

Several retailers and food companies posted quarterly results, offering different views on where they stand in a recession that has consumers dialing back spending.

Macy’s posted a better-than-expected profit as it cut costs, but the department store operator’s new, higher earnings forecast shows full-year profit could still fall short of analysts’ expectations.

Sara Lee, the maker of baked goods and Jimmy Dean sausage, also reported a stronger-than-expected profit before one-time items on improvements in North America and said it was still considering divesting its international household and personal care business.

Underwear maker Maindenform also saw a profit that topped expectations, thanks largely to strong demand for its shapewear products, and raised its full-year outlook.

However, Liz Claiborne, owner of the Juicy Couture, Kate Spade and Lucky Brand chains,  posted a deeper-than-expected quarterly loss as the recession kept many shoppers from buying the company’s clothing and accessories.

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(Reuters photo)

Check out a government report showing that U.S. consumer spending rose 0.3 percent in May after an upwardly revised flat reading in April.

It was the first gain in spending since February, as government stimulus pushed incomes higher.

“Probably the increase in personal income was due to the increasing transfer payments coming from the government right now as you’re starting to see some of the stimulus kick in,” said Doug Roberts, chief investment strategist at Channel Capital Research.

“But right now what you have to look at is, though consumption is positive, it’s kind of a tepid rebound versus the huge bounce back everyone was expecting. So we have to see if this is stabilization.”

Meanwhile, personal income in May surged 1.4 percent from April as social benefit payments included in the government’s massive economic stimulus jumped. The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income and other benefits.

But much of that stimulus money has not yet been spent. The data showed the savings jumped to a record annual rate of $768.8 billion — the highest level since records began in 1959. The saving rate climbed to 6.9 percent, the highest since December 1993.

“The rise in consumption was normal, but the rise in income was abnormally high because of government payments to people with the stimulus and social security, etc,” said Richard Hoey, chief economist at Mellon Financial Corp.

“You’re going to get a lot of commentary about the super-high savings rate, but the reason the rate was high was because of this abnormal burst of income at a rate that is clearly unsustainable. The rise in the savings rate isn’t reflective of any behavioral phenomenon in the consumer. It is a one-month burst in income.”

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(Photo: Reuters)

When people hunker down, apparently they eat more salad. 
 
It’s either that or they’re using Hidden Valley Ranch dressing on veggies or some other snack.  Despite it’s higher price - it sells at about a 40-50 percent premium to its rivals - the bottles are selling well in the downturn, Clorox CEO Don Knauss said on Thursday.  Yes, the company that brightens your whites also sells white dressing. 

Incidentally, we chatted with Knauss while he dined on a salad served with, you guessed it, Hidden Valley Ranch.
 
While some shoppers are laser-focused on saving, overall Americans still want what they want when they want it and they’re willing to pay.  The recession may have changed some mindsets, though.

“Leveraging your equity to sustain a lifestyle, I don’t think that’s coming back. I don’t think people are going to be ripping equity out of their home so they can get another plasma TV or a third car, I think that’s changed,” Knauss said.
 
Lucky for him, about 90 percent of his company’s products sell for under $8.

Knauss said Clorox is seeing “very good trends” on people buying little indulgences like Burt’s Bees and that dressing.

As the downturn continues, one thing people have cut back on is caring for the appearance of their cars.  Products such as Armor All tend to be more discretionary than cleaning or food products, Knauss told Reuters.  Still, it’s a business worth being in, since it carries some nice margins that boost the company’s average.

(Reuters photo)

Check out the quarterly results at Wal-Mart.

The retail giant posted a flat profit in line with Wall Street’s expectations, but it gained market share in the recession as consumers sought to take advantage of the company’s low prices on necessities.  

Wal-Mart Chief Executive Mike Duke said the company remains cautiously optimistic about the timetable for the economic recovery, while Vice Chairman Eduardo Castro-Wright said a large part of its U.S. growth was coming from new customers.

Others have accepted the new reality of thrifty shoppers as well, as upscale, natural grocer Whole Foods blew past analysts’ profit expectations thanks partly to cost controls and lower-priced fare.  Department store operator Kohl’s, which typically has lower-priced items than other chains and uses discounts to lure shoppers, also just topped Wall Street’s profit expectations.

Hopes the economy will soon emerge from recession were dented this week by a government report that showed sales at U.S. retailers fell for a second straight month in April.

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(Reuters photo)