Retailers, consumers and prices
Sears Holdings Corp reported a quarterly loss this morning. But the thing that left analysts like Credit Suisse’s Gary Balter scratching their heads was the company’s expectations for higher earnings before interest, taxes, depreciation and amortization (EBITDA) for the full year.
“We are struggling with what we are missing in the context of Q1 being down over $385 million in EBITDA and other comments in the release that talk about the expected difficult sales and gross margin environment,” Balter said in his research note.
Sears said sales fell about 6 percent to $11.1 billion in the quarter. Total U.S. same-store sales were down 8.6 percent as the appliance, lawn, garden and apparel segments languished.
Balter described the second half of the past year for Sears as an “unmitigated disaster” with very high inventories, and expenses that pointed to sales levels that were not reached.
In April, 24.5 percent of American consumers postponed a major purchase — an item of $500 or more – citing worries over higher gas prices, job security, credit card debt and the wait for a tax refund, according to a survey conducted by America’s Research Group.
That’s a big shift from a year ago, when almost 23 percent delayed a major purchase, saying they “did not want to spend the money right now.”
Will Starbucks ever get it just right with the coffee testers at Consumer Reports?
In March 2007, the magazine blasted Starbucks’ drip java for being too burnt and bitter, and said fast-food vendor McDonald’s had a superior brew.
Check out upcoming earnings and what they might say about food costs.
Food inflation is one of many factors putting pressure on U.S. consumers. (Housing, the credit crunch and soaring gasoline prices are some of the others.) But so far, big packaged food companies have been sticking to the mantra that consumers are willing to pay a little more for their wares as long as perceive they are getting a benefit in return.
Next week promises to offer snapshots on how rising food costs may be affecting consumer behavior. That’s because both Kraft, the largest North American food company, and Kellogg, the largest cereal maker, are slated to report earnings.
Kraft gave reporters a preview this week of new products they are launching, and none seemed to be geared to consumers trying to cut back on spending.
But grocery store operators seem to know that many consumers are scrambling to pay for necessities like food these days. Both Kroger and Supervalu are offering bonuses for consumers who turn their tax rebate checks onto gift cards to be used in the store. (Those rebate checks also are expected to start coming next week.)
So the question is, are things different this time around? Will the rising cost of fuel and food and an economy that might be in recession cause consumers to trade down to store brands and other cheaper alternatives?
Also in the basket:
Rising food prices are “global crisis”: U.N. chief
Charming Shoppes exploring alternatives on non-core assets
Protest-hit Carrefour cancels China sales plan
Plastic bottle scare is a boon for some (N.Y. Times)
McDonald’s posted a higher-than-expected quarterly profit on Tuesday, boosted by strong overseas sales. Coach also reported a higher-than-expected profit, helped by higher sales at stores in North America and Japan.
But the impact of a weak U.S. consumer and a weak U.S. economy was clearly on display as the earnings report began to roll in this week.