Check out the Retail Metrics earnings snapshot.

About two-thirds of the way through the second-quarter earnings season, retailers are beating earnings expectations by 5.1 percent on average, the research firm said.

But those were pretty low expectations and earnings are still down 6.4 percent compared with a year earlier. It is even worse when Wal-Mart is excluded. Then earnings are down 9.8 percent, Retail Metrics said.

Revenue is also down 2 percent.

With 83 retailers reporting, 41 percent had year-over-year earnings gains and 57 percent had declines.

Auto parts, drug and apparel retailers were among the groups seeing earnings gains, while teen apparel, department stores and home building supply stores were among the worst performers, Retail Metrics said.

Also in the basket:

Chico’s profit rises,  meets street view

Staples profit falls; says won’t give outlook

Burger King profit rises

Borders posts wider-than-expected loss

(Reuters photo)

Could Americans really be getting the hang of life without excess? According to two recent consumer studies, they just might be.

NPD Group Inc, a market research firm, said on Tuesday that it found consumers are starting their back-to-school shopping later, spending less, and shifting away from discretionary items like shoes, clothes, and beauty items. Instead, they are focusing on necessities like school supplies and calculators.

“Back-to-school will be a big indicator of the consumer’s psyche with regard to overall spending this year compared to last year,” said Marshal Cohen, NPD’s chief industry analyst. “Consumers are clearly putting need over desire. They are more highly influenced by value than by fashionable or trendy products.”

According to NPD’s survey, the number of people who said they either ‘haven’t started’ or ‘don’t plan to shop for back to school’ by the end of July dropped 5 percent from last year .

About 44 percent of respondents said they planned to spend less for back to school, compared to 35 percent last year. The study also found that the percent of back-to-school dollars people plan to spend on footwear and apparel fell 9 points to 39 percent and 8 points to 52 percent, respectively.

Meanwhile BrandKeys, a marketing consulting firm, surveyed 10,000 households across the United States in July and found that the plans for back-to-school spending were down 10 percent this year. Spending fell across all categories, except for clothing.

“Clothing is unchanged because children grow,” said Robert Passikoff, president of BrandKeys. Even though spending fell in categories like computers, school supplies and study aids, Passikoff said kids will be going back to school pretty well kitted out in the classroom.

“Even in this economy, it’s still true that any investment in knowledge always pays the best interest,” he said.

(Reuters photo)

It was the best of times, it was the worst of times …

When trying to determine how and when consumers will recover from the downturn, Coca-Cola CEO Muhtar Kent sees the world broken into four quadrants.  It’s “A Tale of Four Cities,” he said.

Think of four different quadrants, Kent said on a call on Tuesday after the company reported second-quarter results.

1. Europe, North America and maybe a couple of other economies - “where we will probably be experiencing resets in terms of the consumer psyche, where they’ll probably do things differently than they’ve done in the past.” 
 
2. China, India, Brazil - very strong, quick rebound 
 
3. Japan - “stagnation” 
 
4. Eastern Europe, Russia and the Ukraine - volatility.  “It could come back quickly and then it could go back down quickly. I think we’re in for a few years of zigs and zags for Russia, Eastern Europe and so forth.”
 
(Reuters photo of Kent at a 2008 news conference in Tokyo)

Check Out this analyst’s view on the toy sector.

Tim Conder, an analyst with Wells Fargo Securities, said toy shares continue to offer the best “risk/reward” as those in his coverage, like Mattel, Hasbro and RC2 Corp, continue to gain relative market share.

“Despite on-going consolidation among retailers and investor concern about growing major retailer ‘clout’  via pricing pressure and private label toys, major toy manufacturers have gained share. Why?” Conder asked in his note.

The answer could be –  ”(1) Financial staying power, (2) Uninterrupted supply chains while 2nd/3rd tier vendors had issues during the peak of the credit freeze, (3) Licensed/owned brands that major retailers need to draw consumers (e.g., Barbie, Transformers, Star Wars, Spiderman, Thomas & Friends, Sesame Street, John Deere), and (4) Dependable consistency to deliver globally as major retailers expand,” Conder said.

Conder’s positive take on toy makers comes ahead of major earnings reports that begin this week with No. 1 toy maker Mattel, followed by rival Hasbro early next week.

Also in the basket:

Vodka maker CEDC to offer 5.5 mln common shares

Philips sees early signs of recovery, boosting shares

Japan’s Suntory considering merger with Kirin

Kellwood continues to negotiate upcoming maturity

Trade group challenges Wal-Mart on health care (WSJ - subscription required)

(Photo/Reuters)

Not too long ago, U.S. grocers were sprinting to be the first to get smaller stores up and running. Not any more.

Wal-Mart Vice Chairman Eduardo Castro-Wright said the world’s biggest retailer is taking its time testing its convenience store-sized Marketside grocery stores, due to the economy.

“We’re pleased with it, but at this point in time given the current condition in the marketplace … we are not accelerating that effort until we have better data to make a decision,” Castro-Wright told reporters after the retailer’s annual meeting.

 In October, Wal-Mart officially opened four Marketside stores in the Phoenix area. The stores cater to shoppers who are looking for ready-to-eat meals and fresh produce, and might not have time for a trip to a full-scale grocery store.

Marketside stores are roughly 15,000 square feet, while Wal-Mart’s supercenters average 187,000 square feet.

Meanwhile, Tesco – Britain’s largest retailer – has slashed expansion plans for its competing Fresh & Easy stores and the concept is undergoing an “evolution” as the company works to find its sweet spot with U.S. shoppers.

Fresh & Easy’s early plans called for 200 stores in the United States by February 2009. The chain now expects to open its 200th location by November 2010. Fresh & Easy is putting more focus on value and adding about 1,000 items to its small-format Fresh & Easy stores’ current 3,500-product assortment, which represents about 10 percent of what a typical U.S. supermarket carries.

 ”This isn’t about changing the concept of Fresh & Easy,” Tesco spokesman Jonathan Church said. “What we’ve got to do is fine-tune the model for the customer we have before us today.”

(Photo: Reuters\Jessica Rinaldi; Video\Lisa Baertlein)

Reuters asked the chief executive of McDonald’s, one of the world’s biggest companies and a closely watched gauge of consumer spending,  what every investor wants to know: Has the economy hit bottom?

“In the United States, there is some argument to say that these green sprouts that are showing relative to economic growth are pointing to the fact that we might have (hit) bottom and now it’s starting to grow.

“If you look at some of the sectors relative to the economy, one could argue that we’re not at the bottom and we’re not looking at an upturn.

“I listen to all the economists and others. I’m not an economist; I’m a hamburger guy … Yes, we operate better in a robust economy, but we’re positioned well to operate well in this environment and I don’t think that you would want the CEO of McDonald’s to tell you whether or not the economy of the United States as a whole has bottomed out or headed up. I can only respond regarding the impact that it’s had on McDonald’s.”

(Photo\Reuters)

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.

Also in the basket:

Coke to launch bottle partly derived from plants

Urban Outfitters quarterly profit falls

LVMH to take stake in ethical fashion brand Edun

Nice Work if You Can Mix It (Wall Street Journal)

Massachusetts Adopts Rules for Calorie Counts on Menus (Wall Street Journal)

(Reuters photo)

Check out a glimmer of hope on the employment front.
 
Planned layoffs for U.S. firms fell in April to their lowest levels since last October, according to a  report from outplacement consultancy Challenger, Gray & Christmas. 
 
Okay, layoffs are still at recessionary levels, with U.S. employers announcing plans to cut 132,590 jobs in April.
 
But CEO John Challenger says the fact that they are falling could mean that employers are a little more confident about future business conditions.
 
If employers start feeling more confident and stop laying off people, that could spur more confidence in employees and eventually get them to spend more at retailers, which, after all, is what this blog is about.
 
In a report by Discover, the credit card issuer, the number of consumers saying the economy was getting better was 23 percent in April.  While that might not seem like much, it is still 8 percentage points better than in March.
 
Also, 51 percent of consumers said the economy was getting worse, down from 61 percent in March.
 
“Consumers continue to approach their spending with caution, albeit a little less so in April,” said Julie Loeger, senior vice president of brand and product management for Discover Financial Services.  “As they grow more confident in the economy and their finances, consumers may boost their spending; which should help with an economic recovery.”
 
Are these the “green shoots” of an improving economy, or just optimism waiting to get shot down?
 
Also in the basket:
 
Carlsberg Q1 doubles on Eastern Europe gains, cost cuts
 
In Target tussle, a store becomes a battlefield (N.Y. Times)
 
Barneys aiming to close two stores (Wall Street Journal)

(Reuters photo of job fair)

Check out the “Downturn Generation.” 
 
That’s what data tracking firm Information Resources Inc is calling a “new generation of Americans (that) is adopting practices similar to Depression-era shoppers, implemented both to weather the recession and to keep a close eye on spending long after the recession ends.”
 
Basically, we want everything on sale.  And that means lots and lots off the original price.  The New York Times today pointed out how retailers are pushing deep discounts of 50 percent or more to attract shoppers.

According to IRI’s study, more than 69 percent of consumers surveyed say they are more likely to look through retailer ads for deals and nearly 82 percent are more likely to look for sale prices once in the store.
 
Also, it’s not just one store they are looking at.  Fifty-nine percent visit multiple stores for the lowest prices, and 42 percent of those shoppers will continue to do so into the future.
 
Just under two-thirds (65 percent) say price is becoming more important than convenience in brand purchases.
 
Oh, and along with this new frugality comes another benefit: sharing is in and for some people it could stay.

Thirty percent are making bulk purchases with others not in their households to secure low unit prices, and 35 percent of those shoppers intend to continue doing so.  At the same time, more than 34 percent are collecting, sharing and trading coupons with others, with 40 percent of those shoppers planning to continue this behavior.
 
Also in the basket:
 
Price fixing takes a hit (Wall Street Journal)
 
Office Depot posts loss
 
Fortune Brands to cut payout, affirms ‘09 outlook
 
Under Armour posts stronger than expected profit
 
Coke Enterprises profit, outlook tops view
 
DineEquity posts higher profit
 
David Beckham designs (WWD)

(Reuters photo)

Check out the slumping global economy for burgers.
 
Burger King said it had an unexpected slowdown in traffic in March, which cut into the margins at the company’s restaurants.
 
The biggest culprits were Germany, the company’s second-largest market, and Mexico, the only market in Latin America where the company owns restaurants.
 
Burger King is attacking the traffic decline with “value” menus. In Germany, it is offering “King Deals,” which are “value-priced” combo meals. It has also relaunched the 99 euro value menu and is also opening more during breakfast.
 
In Mexico, the company is promoting its “Come Como Rey” (Eat Like a King) value menu. Apparently in Mexico, kings eat Whopper Jr.’s. (Or is that Whoppers Jr.?)
 
The company said it is seeing some improvement in April. 
 
Also in the basket:
 
Wal-Mart CEO doesn’t see quick end to the recession
 
Consumers prices fall as energy demand slumps 
 
Apparel firms partner with Yankee stadium (WWD, subscription required)

(Photo: Reuters)