Tax rebate checks are in the mail and some of the rebate cash has already made its way to consumers’ wallets. But will this cash infusion give the economy (and struggling retailers) a boost?

According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.

Here are some comments we rounded up:

• “I will almost certainly save it,” Courtney Hancock said outside a shopping center in the Buckhead section of Atlanta. “At this point there isn’t anything that I’ve been waiting to buy.” Her expected $600 rebate check will likely be used for a bigger purchase later. 
• Lisa Hasson, 39, free-lance pianist and mother of twin, 2-year-old boys in Cincinnati. “I’m probably just putting it in a savings account — holding onto it for the summer. Lean living for lean times.” 
• Ava Lee, 34, has been out of work in Los Angeles since December and says she’ll use her rebate check to pay for “necessary expenses” like food and gas. ”I’d use mine for everyday spending. I would not go out and say, ‘Ooh! I have extra money’,” said Lee, who has turned off her heat and air conditioning to keep expenses down. 
• Sarah Ortiz of Houston said she decided early on to use the tax rebate to pay debt. “I’m trying to get down to one credit card. They say we’re in a credit-crunch,” she said. 
• Daniel Pillow of Houston said he planned to use his rebate to pay his American Express bill, but admitted he’d already used the card to buy some extra clothes in anticipation of getting a check. “I may have spent a little bit, knowing that I was going to get a check,” said Pillow, an employee of the Houston Public Library system. 
• Morgan Lawson, 58, works at the Time-Life Building in New York supervising newspaper deliveries. ”The likelihood of saving it is slim,” he said, adding that prices seem to be rising across the board. He thinks he will have to spend it on necessities, like food and higher energy prices and clothes for his children. ”It sure doesn’t hurt,” to get the extra cash, he said, “But, it’s not a huge boost.” 
• Sergio Rivas, a computer network administrator from Hialeah, Florida, said he would put his rebate toward a deposit on a new apartment.  He said he’s looking for “something a little bit bigger, hopefully with some kind of patio.” 
• Paula Goehe, 61, retired administrative assistant in Indiana: “I’m sorry to tell you I’m not going to spend it. We need the money for retirement. We’ve been retired four or five years and we spent a lot to put our children through college, so we’ll be saving it — even though there is no interest at all.” 
• Dana Bulan, a teacher who lives in Chicago, said she will use her $300 rebate check to pay for her regular tennis lessons and won’t bother trying to save it. ”It’s such a small amount of money, it’s not worth, I think, trying to put it someplace else,” Bulan said.
• John Barker, 57, who installs swimming pools for the “super-rich” in the St. Louis area, said that although his business had not been affected by slowing economic growth, spiraling costs meant he had few plans for his rebate check. ”I’ll put it into my checking account and no doubt it will go for gas or food,” he said in the parking lot of a branch of Bank of America on the outskirts of St Louis. “Looking at the price of oil, I think I’ll need it to fill up my truck.” 

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(Photo: Reuters)

Consumers with a taste for luxury are not only scaling down their purchases at Saks Fifth Avenue and Nordstrom, but are also cutting back on furnishings and decor.

Morgan Keegan cut profit estimates for Ethan Allen Interiors  this week, saying it could be the next victim as a spending pullback takes hold at upscale furnishings companies.

“Home related spending is weak and we are now seeing signs that the typically resilient high-end consumer is pulling back on discretionary spending on furnishings,” analyst Laura Champine said in a research note.

Already, bedding maker Tempur-Pedic has warned that U.S. sales are weak, while Williams-Sonoma noted noted one of the most challenging macro-economic environments in 30 years, Champine added.

Ethan Allen has generally fared better than its furniture peers but rising costs for raw materials, energy and freight are weighing on the sector, Champine said. She cut her third quarter profit estimate for the company by three cents a share to 49 cents, and lowered her full-year estimate by six cents. The company’s fiscal year ends in June.

(Photo: Ethan Allen Website)

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. 

The news battered retail shares as investors’ hope faded that business would improve in the second half of the year. Here is a collection of comments on Penney’s warning:   

KIMBERLY PICCIOLA, ANALYST AT MORNINGSTAR :

“It seems as though the macro environment is really creating a much more challenging retail environment then maybe what was anticipated.” 

She said J.C Penney’s product line is made up of items consumers can hold off on buying in a weak economy. 

“The first half of the year is definitely going to be rocky for most retailers that have a very discretionary assortment. Consumers are very cautious right now in terms of their discretionary  spending.” 

CRAIG JOHNSON, PRESIDENT OF CUSTOMER GROWTH PARTNERS:

“J.C. Penney operates in a very challenged part of the retail sector.”

“The mid-tier mall-based department stores are the center of the retail sector difficulties. … They are the bull’s eye of it.”

ADRIANNE SHAPIRA, RETAIL ANALYST AT GOLDMAN SACHS:

“The direction of today’s revision was not a surprise, given our already below consensus and management guidance view on the quarter. That said, the magnitude of comp declines was worse and does imply that department store top-lines could be facing more near-term ‘core’ sales pressure than initially thought.”

“Importantly, we would remind investors that 1Q contributes the lowest amount of sales to the full year making it more susceptible to deleverage if top-line falls short making extrapolation to the full year incorrect.”

“Importantly, our thesis concerning 1H as being the trough of this down cycle remains unchanged, especially with stimulus checks on the way in 2 months time. As sales recover, we continue to believe that stocks will follow.”

MARSHAL COHEN, CHIEF INDUSTRY ANALYST AT NPD GROUP 

He said the bad Easter season was due to three factors: “It’s early. It’s cold. And the consumer is throttling back.” 

“So you’ve got these three things converging to create the perfect storm.”

He said Penney was being wise, preparing the market to expect less-than-stellar earnings results.  

“We’ve entered into an interesting time at retail. It’s called ‘create lower expectations and exceed them and your stock will jump’. We’ve seen several big retailers do this now over the last couple reporting periods. It’s good. They’re being fiscally responsible.”  

(Photo: Reuters)