Friday, 7 September 2007

US consumer shows resilience in August

I've mentioned a number of times that US consumers are a resilient bunch and that is just what August retail sales show.

U.S. retailers posted a 3.1% gain in same-store sales, better than an original estimate of a 2.5% increase. That compared against a 3.9% advance a year earlier, according to Thomson Financial.

August is the biggest selling month of the back-to-school period, which covers sales from July to September and represents the No. 2 shopping season after the crucial holiday period, said Michael Niemira, chief economist of International Council of Shopping Centers.

Teen retailers posted a 6.5% increase, leading the gain among retail sectors, according to Thomson Financial. More than two-thirds of retailers posted better-than-predicted results, while the rest missed, according to Thomson, which surveyed 45 retailers.
Even Walmart (WMT) beat estimates posting 3% same stores sales growth as opposed to the 1.5% expected by analysts.

Although growth was slightly lower that August last year for the retail industry the numbers are still robust. What is not evident is the extent to which sales were driven by discounts, which can cut into profit. Remember Wal-Mart had cut prices on about 16,000 back-to-school items to drive sales. Gap Inc (GPS) whilst beating forecasts noted that profit margins declined.
"Although merchandise margins were below last year, we're pleased with the progress we're making across our brands," Sabrina Simmons, executive vice president of Gap Inc. finance, said in a statement.
Still it looks as though it's going to take a lot more buffeting from housing and employment to dent the US consumer's enthusiasm.