Retail Giants, Consumer Spending Under Wall Street Spotlight
With mega-retailers Wal-Mart, Target, Macys, and JC Penney, among others, set to release quarterly earnings this week, stock market investors will no doubt be interested in consumer activity trends in the United States – and it appears that there is reason to be optimistic. The mall used to be the place to hang out in the 80s, and even into the 90s, but its grip started to slip in the late 90s and when the global crisis hit, quite a number of shopping malls across the country were forced to close their doors, or became virtual ghost towns with a few die-hard stores hanging on hoping for better times. By 2009, the results of a survey carried out by consultants Customer Growth Partners, revealed that the market share of department stores located in shopping malls had fallen to 2.4 percent. A follow-up survey in 2010 noted that this percentage had moved up to 2.5, indicating a slight, but significant, shift in consumer spending.
A recent survey carried out by Citigroup noted that 52 percent of consumers interviewed agree that the recession has changed the way they spend, as well as the way they save – cutting the spending, and increasing the saving. However, a similar survey a year ago revealed that 60 percent felt this way, with the general consensus being that there is a strong possibility that the majority of consumers will gradually slip into their old ways of spending. This is supported by the latest data from the Commerce Department which indicates that personal income and spending rose in December 2010, while personal savings declined. Furthermore, the Federal Reserve disclosed that revolving consumer debt climbed in December for the first time in 26 months.
Decembers consumer spending data is undoubtedly a reflection of the holiday season, and the increase in retail sales in January may be attributed to post-season sales, but it appears that consumer sentiment is becoming more positive, or at least that consumer fear is receding. With consumer spending being the backbone of economic recovery, investors will be keeping a keen eye on consumer sentiment and spending trends. Consumers may have been quick to cut back in tough times. Conversely, they may be just as quick to start spending when the tough times start showing signs of abating.