Retailers, consumers and prices
Second-quarter profit at cosmetics firm Avon Products Inc more than doubled, as demand in Latin America and other overseas markets more than made up for sagging U. S. results.
Office Depot posted a 6 percent drop in North American retail sales, but a 13 percent rise in international sales during in its most recent quarter.
Still, investors are wondering when and if the United States’ economic malaise will spread to markets like Europe, Asia and Latin America.
Supervalu, whose chains include Albertsons and Save-A-Lot, didn’t see any increase in its total quarterly sales. Its food sales were actually down 0.7 percent, but the company saved itself in part with lower expenses, and reported a higher quarterly profit.
Upon entering Wal-Mart Stores annual shareholder meeting, an observer might be forgiven for thinking they had just walked into a lively, national political convention.
Patriotic red and blue buntings covered the 16,000-seat arena at the University of Arkansas, the music hardly stopped and the crowd was treated to a constrant stream of well-tuned public relations bullet points — in this case, sustainability, community relations and saving shoppers money.
Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.
Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.
Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.
But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive.
Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.
Wonder how a half-point jump in the unemployment number plays into that?
Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.
Also in the basket:
New Wal-Mart director may herald changing of the guard (Wall Street Journal, subscription required)
Target grows makeup artist brands, adds testers (WWD)
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.
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.
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.
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.