Retailers, consumers and prices
Check out the economic cross-currents swirling around U.S. consumers, retailers and manufacturers.
So, what’s it going to be? Inflation, deflation or just a big squeeze all around?
The U.S. economy is still suffering from high unemployment and sluggish consumer spending and sentiment. On Tuesday, the Fed said it would buy more government debt in the face of the weakening recovery.
“The pace of recovery in output and employment has slowed in recent months,” the Fed said after a one-day policy meeting.
There is some concern about deflation, especially in bigger ticket items, with prices falling and cash-strapped consumers holding off on purchases expecting further price cuts, which just leads to more falling prices.
“Just when it looks like buyers were starting to come back, now they have another reason to wait,” Robert Yerex, chief economist at workforce management company Kronos, said. He pegs the chances of deflation in the United States at as much as 20 percent.
But there are also conditions that point to inflation for consumers instead, including rising costs for commodities like wheat, which may be starting to drive up the price of some products on grocery store shelves.
An analysis by J.P. Morgan showed that the price of a 31-item basket of goods at Wal-Mart rose 5.8 percent in July from June. Analysts think Wal-Mart may be pulling back from the aggressive price cuts it made earlier this year and that could lead to other grocers raising prices.
Down the road, rising costs in for cotton, freight and for labor in China could also push prices up for clothes, analysts said.
But a key question is whether consumers, who are used to receiving big discounts, willing to pay more in a weak economy.
The other question is, do consumers really watch closely enough to know when they are paying more in time to push back? Or can prices go up as long as retailers are willing to put the 50 percent off sign out there when products don’t sell?
Also in the basket:
Check out Wall Street analysts having mixed views about different areas of retail.
Eric Beder of Brean Murray, Carret & Co raised his rating on long-suffering Abercrombie & Fitch to Hold from Sell, noting that the stock is currently trading 2 percent below his previous price target. With investors now assuming weak same-store sales and inventory overhang, and with international growth somewhat lower than expected, Beder said the risk/reward potential has improved enough for him to raise his rating.
Check out how shoplifting rates are easing amid economic signs of life.
As severe economic pressures subside, U.S. retailers are noticing a slight decrease in merchandise losses, a.k.a. ”shrinkage,” according to the National Retail Federation. Preliminary results of the group’s latest survey show that shrinkage decreased to 1.44 percent of retail sales in 2009, down from 1.51 percent in 2008.
According to the survey, retailers lost $33.5 billion through lost merchandise last year, down from $36.5 billion in 2008.
From our apparel correspondent Nivedita Bhattacharjee:
Financo’s president Bill Susman identified an unlikely rival that could hamper retail sales all over the world in the coming months – the 2010 FIFA World Cup.
As if jittery financial markets, oil spills and debt crises are not enough, retailers will soon have to fight the World Cup to entice customers, many of whom will be esconced in front of their TV sets as the most popular soccer tournament kicks off later this month.
Check out U.S. retailers posting better-than-expected profits but seeing their shares fall.
Kohl’s Corp on Thursday posted quarterly profit that rose more than Wall Street had expected. But the mid-tier department store operator’s shares fell nearly 3 percent after its forecast for the second quarter and full year fell short of analysts’ estimates.
Eckhard Cordes likes football. The chief executive of the
world’s third largest retailer Metro likes German Bundesliga
club Bayern Munich, to be more precise. And he likes giving
examples. “I tend to give examples, sometimes silly
examples,” he admitted at the company’s annual news conference
on Wednesday in Duesseldorf, Germany.
So when he was asked to explain a new structure at Metro’s Cash
& Carry business — which some analysts had seen as a demotion
of the unit’s head Frans Muller, who has to give some of his
responsibilities to Joel Saveuse — he made use of his passion.
“I’m a fan of Bayern Munich,” he began and went on to say
Check out the various descriptions of the 2009 holiday shopping season, which unofficially ended on Friday with Christmas. Analysts’ Monday morning reviews range from ”adequate” to “quite pleased”.
“All in all … Holiday 2009 was good enough, but has a long way to go with catching up to what the consumer really wants,” said NPD Group analyst Marshal Cohen. “And if the economy is truly to recover, not only does the housing and credit market need to recover, but the innovation market for retail products must recover as well.”
Check out what kids want for Christmas.
Okay, if you are reading this item on Dec. 24 and seriously looking for an idea of what to buy a kid for Christmas, your choices are likely somewhere between “The Perry Como Holiday CD Box Set” and a “Really, Stop-Tickling-Me-It-Isn’t-Funny-Anymore-Elmo.”
But no worries. Kids between ages 6 and 18 are liking cash and gift cards even more this year, according to a new survey.
Check out Macy’s disappointing fourth-quarter forecast.
Apparently, the Thanksgiving Day Parade may be the highlight of the quarter.
The department store chain operator forecast fourth-quarter profit below analysts estimates and its shares fell Wednesday morning.
The retailer also expects same-store sales to drop 1 percent to 2 percent in the quarter. While that is less of a decline than the full year, it is also off a pretty easy comparison. Same-store sales fell 7 percent in the year-earlier fourth quarter, when the country was waist deep in a recession and credit crunch.
It’s Jones Apparel. The retailer and apparel maker once again “reported a much higher-than-expected” quarterly profit. Last quarter, Reuters said the company “beat estimates handsomely.” The quarter before that it was “easily beat estimates.”
Heck, even in the fourth quarter, when almost all retailers and apparel makers were hammered by the recession and credit meltdown, the company reported a “smaller-than-expected” quarterly loss.