Spending bouncing back ... really!
A weekly survey of retailers shows that March is shaping up to be a great month for sales
There’s no doubt that consumers are watching their money carefully. Just today, a report from Investors Business Daily said that U.S. consumer confidence fell in March to its lowest level in a year, as high unemployment and economic uncertainty continues to take a toll. And when we get retail sales figures in a few days, the bar is set pretty low with a -0.2% growth rate forecast.
Businesses are still on the defensive as a result of these conditions. For instance, Target (TGT) just launched a plan that allows consumers to swipe digital coupons sent to their smartphones. The move is designed to help tight-fisted spenders feel better about a trip to their local big box retailer. (Find out how you can sign up for the plan here!)
But is all this gloom around the retail sector really warranted? Preliminary estimates indicate that even though attitudes might be gloomy, it appears that consumers are still spending considerably more cash than last year.
According to a
weekly tally by the International Council of Shopping Centers, sales in March
are off to a great start. Specifically, sales at U.S. chain stores in the first week
of March rose 3.4% above the same time last year and 2.9% over the previous
week. That's the best year-over-year weekly growth seen since the week of July
14, 2007 and the best week-over week gain since Dec. 22, 2001.
Based on the month's strong start, the group projects March sales will be 2.5% to 3.5% higher than last year's.
Yes, there’s a negative forecast for the headline sales number in February. But sales were depressed by record snows in the Eastern U.S. and we shouldn’t read too much into these figures. In fact, retailers’ hopes that pent-up demand would shift to March appears to be playing out. An early Easter this year should stoke sales as well.
And let’s not forget that many retail stocks have proven that they are doing just fine even in this economic environment.
Take discount travel site Priceline.com (PCLN). In mid-February, PCLN said that its quarterly profit more than doubled with strong earnings of $78.5 million, and sales jumped by a whopping 33%. As a result, shares skyrocketed 9% the following day alone! Conventional wisdom would lead you to think that airfare and hotel bills would be too pricey for most Americans, but this online retailer proved that thinking wrong.
So while the headlines may warn that consumer spending is anemic and while “experts” urge investors to steer clear of retailers, perhaps some retailers are worth another look. Things may not be as bad in March as many fear.
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