I once dealt cards at a charity poker tournament and was amazed to observe the pile of $1 and $5 dollar bills moved around the table from player to player. Today’s news on retail sales reminded me of that experience, only now the consumer is dealing the cards. Sitting at the table are all the big box retailers vying for a share in a limited pile of ones and five dollar bills.
Wal-Mart (WMT: Q3 .84 cents/per share, expected .81) and Target (TGT: Q3 .81 cents/per share, expected .79) both reported better than expected earnings but it was at the expense of furniture, appliance and hardware stores. Why are general merchandisers doing better than specialty? Simple, you and I have limited resources and are spending hard won CASH on bare essentials and sitting on the rest.
With unemployment now at 10.2%, credit card circulation falling (by 18% just since the beginning of 09) and stimulus winding down, recovery is shifting squarely on to the shoulders of a stressed and stretched consumer.
Indeed, retail sales rose 1.4% in October. But wait, when you exclude automotive sales, retail only grew at a modest .2%. Avoiding a double dip recession will depend on the consumer and how they feel about the their future prospects. Are consumers cautious–optimist or concerned–pragmatist? If the later, we’ll have some ground to cover before business can breath easy.
Black Friday is nearly here, the apex of the retail shopping season. It will be interesting to see the post game results. Not just the percent of growth or retraction, but also the distribution of either success or failure. Will the general merchandiser walk away from the table as the clear cut winner? Or will everybody get a little piece of the pile? Stick around, my analysis will be posted next week.
rwhite35