Shop Talk

Check Out Line: Jobless claims rise, again

Check out the latest batch of grim data about the U.S. jobs market.

As if the consumer sector wasn’t nervous enough about a sputtering U.S. economy, the number of people filing new claims for unemployment insurance unexpectedly rose in the latest week to its highest level in close to six months.

Labor Department data showed the number of new claims for jobless benefits up 2,000 at 484,000 in the week ended August 7, the second straight increase. Economists polled by Reuters had expected claims to fall to 465,000 from the previously reported 479,000.

The news brings more pain to already angst-ridden retailers, who are hoping to pass on rising input costs to consumers with higher prices as companies try to guard margins in a tepid sales environment.

In July, retailers posted weaker-than-expected sales despite cutting prices to lure back shoppers, suggesting a rough back-to-school season.

Also in the basket:

Kohl’s beats, but outlook tepid on higher costs

Check Out Line: Are consumers spending?

Check out the latest, somewhat confusing, figures on consumer spending.

The Commerce Department said U.S. consumer spending increased 0.2 percent in February, in line with market expectations, after rising 1 percent in January. That makes two straight months of gains.

However, after adjusting for inflation, consumer spending in February fell 0.2 percent.

The data also showed that incomes fell by 0.2 percent after January’s revised 0.2 percent rise. Analysts polled by Reuters had forecast incomes to fall 0.1 percent.

So is this good news or bad news about the state of the consumer?

Here is what Robert Blake, senior currency strategist at State Street Global Markets, had to say:

“There were some revisions to the prior month. In real terms, January was now even stronger than we first thought, but the February number in real terms was actually weaker. Net-net, we are looking at possible spending in the first quarter in real terms that was positive, possibly, a 1 percent gain…which would signal that the consumer has gone a long way to recover from the absolute calamity in the second half of last year when consumer spending dropped 4 percent at an annual rate. So it was a positive report.”

Check Out Line: Survey says…. ugghhh!

Check out how it ain’t getting any better any time soon.   The latest evidence is a new survey by America’s Research Group that showed that nearly a third of U.S. households think it will be a year before their families are better off.   That might not seem like so many, until you see that another quarter think that it will take even longer.   “We’re looking at a retail meltdown much worse than anyone could have imagined six months ago,” said Britt Beemer, founder of America’s Research Group.   Half of the consumers said their shopping budgets were significantly lowered from last year. And almost all of the rest said they were only the same.   More than half also said they had stopped using credit cards for purchases. And 47 percent said they would probably or definitely not buy something if it wasn’t on sale.   So, how’s that stimulus going?   Also in the basket:   Bon-Ton Stores swings to Q4 loss on charges   American Eagle meets Street view   Staples posts weak Q4, says will not give ’09 outlook   Tide, Woolite tout their fashion sense (WSJ)   Wal-Mart plans to market digital health records system (N.Y. Times)

(Reuters photo)

The Do-It-Yourself Lift

The recession is leading many consumers to sharpen their do-it-yourself skills, opting to work on their cars and homes themselves rather than hire professionals.

Home Depot said it is gearing up for spring with a wide assortment of lawn equipment and fertilizer products, looking to cash in should consumers cancel their contracts with professional landscaping companies.

The company said some consumers in cold-weather climates bought snowblowers in the fourth quarter, opting to clean their own driveways and save money instead of calling on snow-removal services.

“We wonder if that might not happen in the spring in the garden business,” Chief Financial Officer Carol Tome said in an interview. “If that were to happen, we’ll be ready with a broad assortment.”

Home Depot, which posted better than expected results for the fourth quarter adjusted for charges on Tuesday, gave insights on how its consumers are spending. During the fourth quarter, it said purchases of $500 or more fell in double-digit percentages. But average purchases of less than $20 fell only about 3 percent, suggesting consumers are still spending on basic home repairs.

“Consumers in general are being pretty careful,” Tome said. “We’ve seen savings rates increasing so that will impact consumer spending, too.”

While the rate of sales declines in hard-hit housing markets such as California and Florida has eased, Home Depot is not yet ready to say weakness in those states has hit bottom. Now, malaise has spread to areas that used to be more solid. For example, sales in the Ohio Valley and Pacific Northwest have softened considerably, Tome said.

Sales tax holidays to the rescue?

What’s one way to get reluctant shoppers back into the stores? Give them a sales tax holiday — or two or three.

That’s what the National Retail Federation is urging the government to consider as part of the economic stimulus plan being debated in Washington.

“We think what this can do is to help consumers psychologically get back into the stores,” said Rachelle Bernstein, NRF vice president and tax counsel, on a call with reporters. “We are hopeful that with a national sales tax holiday, which will get a lot of attention, that it might be something to help make the consumer feel good again.” 

The NRF outlined its sales tax idea in December in a letter sent to the incoming Obama administration. The trade group proposed that tax holidays be held on a national level in March, July and October 2009, each lasting 10 days. By temporarily lifting the sales tax for the three 10-day periods, the NRF said consumers could save nearly $20 billion. 

The NRF returned to touting the idea on Tuesday, the same day it forecast that retail sales will fall 0.5 percent this year–the first decline predicted since it began issuing such forecasts in 1995. The NRF said a large part of the forecast hinges on the government taking swift action to implement a stimulus plan.

In order to garner support among U.S. states for so many tax holidays, the trade group is suggesting the federal government reimburse lost revenue to the 45 states that charge sales taxes.

While state sales tax rates range from 2.9 percent to 7.25 percent, providing consumers a break from paying that tax seems to entice them to spend more than usual.

from MacroScope:

Crouching Buyer, Hidden Bargain

The terrible U.S. retail sales  racked up in December -- called a "horror show" by ING -- were all the more gruesome because of the sales on offer to customers in the run up to Christmas. Shops weren't exactly giving things away, but their generosity knew few bounds.

Consider the experience of one visitor to a heaving handbag department in a Maryland Macy's.       Customer: "I would like to buy this handbag please. Oh dear, it appears to be the only one that is not on sale."     Salesman: "So it is. Tell you what, sir, I'll give you 15 percent off anyway."

Happy customer, happy new handbag recipient, unhappy sales figures.

Check Out Line: Mixed Sales News

Check Out mixed news on the retail sales front.

Retailers are now out to lure consumers with after-Christmas deals as data show this year’s holiday season was one of the weakest in decades.

The retail data service of MasterCard Advisors said U.S. retail sales fell as much as 4 percent during the holiday season. SpendingPulse tracks sales activity in the MasterCard payments network and couples that with estimates for other payment forms.

It found that luxury sector sales fell 34.5 percent, as job losses and stock market declines weighed on higher-end shoppers. Specialty electronics and appliance sales were off 26.7 percent.

But the news wasn’t all bad. Online retailer Amazon.com said this year’s holiday sales season was its best yet, with more than 6.3 million items ordered on its site on the peak shopping day of Dec. 15. Online sales were likely aided by winter weather in some parts of the United States.

Retail shares even turned higher on Friday — perhaps investors are more confident that it can’t get much worse?

Also in the basket:

Check Out Line: Spending Still Down

Check Out unemployment’s strain on consumers’ wallets.

This is not what retailers want to hear on the day before Christmas, but evidence continues to mount that consumers are cutting back spending.

The U.S. Commerce Department said consumer spending contracted 0.6 percent in November, the fifth-straight monthly fall. Incomes shrank 0.2 percent. A separate report showed initial claims for jobless benefits last week reached the highest level in 26 years.

Today, retailers are making a final push to lure last-minute gift hunters but surveys indicate the steep discounts are not inspiring consumers to spend. This year’s U.S. holiday shopping season could be the worst in up to 40 years.

Are you spending more or less this holiday season? Let us know.

Also in the basket:

‘Heritage cocktails’ make a comeback

LG expands US appliance footprint

The recession, corporate cutbacks and lower demand for big-ticket items are not stopping LG Electronics from expanding its U.S. appliance business.

The South Korean electronics giant this week unveiled a facility in Atlanta that will be used to train engineers, contractors and sales staff how to use its commercial air conditioning products.

LG, which has been gaining U.S. appliance market share as residential customers buy its washing machines, hopes the Atlanta facility, its first commercial training center in the U.S., will help boost sales of heating and air conditioning systems to hotels, hospitals and schools.

LG is the world’s biggest maker of air conditioners.

“Consumers are looking for value,” Michael Ahn, chief executive of LG Electronics North America, said in a short interview at the training center.

“We’re seeing more (appliance) growth at the lower end than the high end” right now, Ahn added. “Total demand will be decreased next year.”

To respond to the need for value, Ahn said LG was offering lower-priced versions of its Tromm washing machine (pictured), with a washer-dryer pair priced as low as $1,200. LG has been selling major appliances in the U.S. for about six years, and caters to the premium market.

Check Out Line: Falling gas prices mean falling retail sales

Check out the fifth straight drop in U.S. retail sales.

The Commerce Department said total retail sales fell 1.8 percent in November to a seasonally adjusted $355.66 billion following a revised 2.9 percent plunge in October.

Excluding motor vehicles and parts, sales were down 1.6 percent in November after a revised 2.4 percent October fall.

One reason for the decline (besides the struggling consumer) – gas prices.  Gasoline sales plummeted a record 14.7 percent after falling 12.9 percent in October, the data showed. Prices at the pump have fallen significantly and that is reflected in the retail sales report, which compiles total sales by gasoline stations.

The data also showed that sales of furniture, electronics and clothing were up in November after decreasing in October.  Looks like those Black Friday deals were able to rouse skittish consumers into a spending mode.

But the question remains — how much have retailers put profits at risk to gain sales?

Also in the basket: