Tuesday, November 24th, 2009
Consumer Confidence Could Bolster Retailers
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Kohl’s Corporation (KSS), Target Corporation (TGT), and Amazon.com, Inc. (AMZN) are all trading marginally higher after a better-than-expected consumer confidence survey sparked hope that consumers would open up their wallets this holiday season.
The Conference Board’s index of U.S. consumer confidence ticked up for the first time in three months to 49.5, up from a 48.7 reading last month and higher than the consensus estimate of 47.5. The news also comes as retailers head into the Christmas shopping season, which has many retailers hoping that spending will rise during the critical sales season.
However, the stock market took the news with a grain of salt as concerns about jobs remained. According to the survey, the gap between the number of people saying that jobs are hard to find (49.8%) versus those saying that jobs are plentiful (3.2%) was the widest in more than 25 years. Meanwhile, most of the gains came in the “expectations” segment versus the “present” segment.
Knowing this, many consumers are likely to seek out bargains this holiday season. And a recent survey of brand perceptions conducted by YouGov found that Amazon.com, Kohl’s, eBay, Best Buy, and Target led in terms of value perception. As a result, these stocks may be some of the best performers this holiday shopping season if sentiment doesn’t markedly improve.
Meanwhile, Black Friday is expected to bring in the most holiday shoppers this season. Wal-Mart is offering consumers a $100 gift card with the purchase of a $199 Nintendo Wii, while Best Buy and other electronics retailers are advertising notebooks with Windows 7 for under $300. And Target is expected to offer some home appliances for extremely low prices.
In the end, the International Council of Shopping Centers forecasted a 1% to 2% rise in holiday sales this season. The results should also be helped by a combination of smarter money management during the recession, as well as generous layaway plans and financing for big-ticket items on the part of retailers.
The Takeaway…
- Consumer Confidence was better-than-expected in November, primarily as it relates to future expectations of a recovery.
- Jobless rates and lack of credit could be two things that put a damper on the holiday season, according to some analysts.
- Value-orientated retailers are likely to see the biggest gains, while spending is expected to rise 1-2% this holiday season.
Written by Simon Monger
