Inside This Issue - News
Outlook improving for many of nation's largest retailers
June 14th, 2010
NEW YORK – Many of the nation’s largest retailers posted solid first quarter results, and strong sales in such categories as apparel and home goods offer more signs that consumer confidence is improving as an overall economic recovery appears to gain traction.
Target Corp. reported that its net income rose nearly 29% in the first quarter to $671 million. The retailer’s revenue increased 5% to $15.59 billion, and sales of discretionary items with higher profit margins — including clothing — were particularly healthy. Same-store sales were up 2.8%.
BJ’s Wholesale Club Inc., Costco Wholesale Corp. and Big Lots Inc. were among the other retailers that reported higher-than-expected income in the first quarter, driven in part by increased discretionary spending on the part of consumers.
"By offering a merchandising assortment that is highly discretionary in nature, we believe our business is uniquely positioned to benefit from an improving economy," Big Lots chairman, president and chief executive officer Steve Fishman said.
Furniture and home were the leading merchandise categories at Big Lots, posting double-digit comparable-store sales gains.
"Hard lines, led by our electronics department, continues to be a growth category," Fishman added. "And our seasonal business comped up mid-single digits despite unfavorable weather conditions across most of the country in the last two weeks of the quarter."
Macy’s Inc. and Nordstrom Inc. were among the higher-end retailers to report improved first quarter results, and at the other end of the spectrum Dollar Tree Stores Inc. too posted higher profits driven by increased sales and improved store traffic.
Walmart, which outperformed most retailers during the recession, also had a strong first quarter, at least in terms of net income. But the retailer posted a decline in same-store sales. Analysts suggest that higher-income customers are trading up to other retailers for their discretionary purchases, while Walmart’s most loyal shoppers are being squeezed by rising gasoline prices and continued high unemployment.
Target chairman and chief executive officer Gregg Steinhafel sees reason for concern about the economy as well.
"Clearly the economy and consumer sentiment have improved since the weakest point in 2009, but we believe that both are still somewhat unstable and fragile, and will likely continue to experience occasional setbacks as the year progresses," he says.
Target executive vice president of merchandising Kathee Tesija says job losses and other effects of the recession continue to be a problem for many households, but notes that many of Target’s core customers did not feel such a direct impact on their finances and were curtailing their spending mainly as a precautionary measure.
"Those guests paid off debt, created and stuck with budgets, and now they’re feeling optimistic enough to begin putting well-considered discretionary items back into their baskets," Tesija says. "Many have begun to indulge in small ways, and our discretionary assortment provides the perfect opportunity for them to indulge while feeling smart about the decision."
Global consumer confidence, meanwhile, rebounded in the first quarter of 2010 to its highest level since the third quarter of 2007, according to the latest edition of the Nielsen Global Consumer Confidence Index.
"For the first time in two years, Nielsen’s global consumer data provides evidence that economic prospects are improving," says chief economist Venkatesh Bala.