Retailers, consumers and prices
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.”
By Nicole Maestri
Check out the ongoing struggle to sell clothes to recession weary Americans.
J.C. Penney and Abercrombie & Fitch both reported quarterly results that show consumers are still cutting back on non-essential items, with Penney also warning profit for the year would be worse than analysts expected.
Consumers have been hammered by the recession, mounting job losses and credit worries, and it appears they are sticking to shopping lists for groceries and other essentials, rejecting unnecessary purchases and seeking deep discounts.
While the conviction to buy only what they need has hit sales for department stores like Penney, consumers’ desire for bargains has battered Abercrombie, which has stubbornly kept prices higher than rivals, other than discounting clearance items.
“With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen,” said Abercrombie Chief Executive Mike Jeffries, a retail industry veteran. The teen clothing retailer posted a first-quarter loss wider than Wall Street’s expectations, and in an abrupt change, said it is conducting a strategic review of its struggling Ruehl chain. Meanwhile, Penney posted an in-line quarterly profit, but forecast second-quarter and full year results below analysts’ expectations. “We expect consumer spending and mall traffic to remain weak, which will be particularly evident against tough comparisons in the second quarter,” CEO Mike Ullman said. Also in the basket: Kohl’s, Nordstrom beat forecasts, raise 2009 views H&M April sales rebound boosts recovery hopes Target pilot pays employees to monitor health (Photo: Reuters)
Check out the October monthly sales results due this week.
Retail chains, like Wal-Mart, Costco and J.C. Penney, will release October results on Wednesday and Thursday, and Thomson Reuters is forecasting a decline of 0.1 percent.
JC Penney surprised the retail sector on Friday with its warning that first-quarter earnings could be as much as 38 percent below its initial forecasts, and it said it expects the difficult environment to persist throughout 2008.
The warning came the same day that the Reuters/University of Michigan Surveys of Consumers showed that U.S. consumers’ confidence weakened to the lowest in 16 years in March, pointing to recession.