More good news on the economy - retail sales

Not just a leading indicator anymore...

"In October, Signs of Life at [U.S.] Retailers
(New York Times – Stephanie Rosenbloom)

October was far and away the best month American retailers have had since consumers put the brakes on spending last autumn. Major categories had robust sales growth for the first time in more than a year, new figures show.

On Thursday, when individual chains report their October sales, the industry is expected to post its strongest sales figures yet in this recession. Contrary to predictions made only a few weeks ago, the nation’s stores could be poised for a merrier Christmas this year than last.

To be sure, the enthusiasm of industry professionals is tempered. A major reason the latest numbers look so good is that they are being compared with figures from October 2008, the first full month of a brutal nationwide spending freeze.

“Things are better than they were a year ago,” said Michael McNamara, vice president for research and analysis at SpendingPulse, an information service by MasterCard Advisors. “But we’re still below where we were two years ago.”

The latest sales figures come from his organization, which estimates sales for all forms of payment, including cash, checks and credit cards. They show, for example, that sales of women’s apparel increased 0.6% in October, the first positive figure since August 2008.

However, women’s apparel sales are still 12.2% lower than in the heyday of consumer spending, in October 2007. That theme – up compared with last year, but still down compared with the height of the boom – played out across several retailing categories, including jewelry and luxury goods.

Nonetheless, the signs of recovery were unmistakable in the sales numbers that MasterCard Advisors released late Tuesday.

One sign was that retailers were able to drive sales in October without offering the kinds of deep margin-eroding discounts they dangled last year. “That’s generally a positive,” Mr. McNamara said. “Even though the number of purchases may not be spiking, it could be an indication that inventory and demand are more lined up.”

Another positive sign is that retailers and analysts are beginning to see some stabilization in California, one of the places hit hard by the recession. Big chains like Mervyn’s and Gottschalks went belly up there. Recently, though, major retailers with a presence in California – Target, Costco, J.C. Penney and Kohl’s – have said to varying degrees that they were seeing improved sales and customer traffic.

Mr. McNamara said apparel sales on the West Coast increased 2.2% in October. “We are showing a positive comparison for the first time in the last year,” he said.

In a research report last week titled “Christmas in Southtown: California Dreamin’,” Bill Dreher, a senior research analyst with Deutsche Bank Securities, said companies like Costco and Nordstrom were “seeing solid results in California,” and underscored that Kohl’s has had sales growth for several months now. (Kohl’s has also gained significant market share in California, having snapped up 36 Mervyn’s stores on the cheap.) “With this earnings acceleration going into Christmas,” Mr. Dreher said, “it looks like early predictions of flat-to-down Christmas sales will turn out to be stale.”

Many analysts, economists and the National Retail Federation are forecasting holiday sales to be the same or slightly worse than last year. But more bullish analysts, at Deutsche Bank and Citi for instance, think sales for the industry will rise 1% to 2%.

Over all for the industry in October, apparel sales increased 3.4% compared with the period a year ago, luxury goods rose 6.5%, jewelry increased 7.2%, and department store sales declined 1.5%, according to SpendingPulse.

E-commerce was the most robust sector, increasing 18.7% – the third consecutive month of double-digit growth – because of strong sales of small, low-price goods.

October is typically a clearance month, though some industry professionals consider it an early indicator of Christmas sales. It appears the month started off strongly. Analysts think stores benefited from cool weather, Columbus Day discounts, and last-minute back-to-school shopping. Halloween may have hurt sales slightly, though, because this year it fell on a Saturday, typically a shopping day, Mr. Dreher said.

Even so, analysts at Standard & Poor’s Equity Research said in a report on Monday that “consumers appear to be shopping again for apparel and some home fashions.”

Whether there will be enough merchandise to go around this Christmas remains to be seen. Mike Moriarty, a partner at A.T. Kearney, a management consultancy, said many retailers were intentionally low on inventory. “They’re going to have an unhappy but maybe a safe holiday,” he said."

 

Sounds like a disaster.
Sales numbers like this will not create jobs. What a negative report.

 

"Many analysts, economists and the National Retail Federation are forecasting holiday sales to be the same or slightly worse than last year. But more bullish analysts, at Deutsche Bank and Citi for instance, think sales for the industry will rise 1% to 2%."

However you slice the above comment, it spells hard times for retail. Jan. and Feb. will bring numerous retailers closing up for good. It's only a question of how wide spread the train wreck will be.