Many stores reported an increase in sales in the month of January. The sales were up 4.2% from December (LA Times), which is a large number considering the typical post-holiday spending slump. Even though the US shoppers are still in a bargain-hunting mood, the fact that so many popular retail stores were having sales was enough to lure the shoppers into buying things. Multiple retail companies reported that the number of transactions was higher than the same time of last year (Daily Finance).
Big name franchises like Victoria Secret had a 35% increase in profits, which experts say is because of their decision to move the semi annual sale from late December to early January. Limited Brands, also owned by Victoria's Secret saw an increase in stock as a result to the increase in profits from $1.02 per share to somewhere between $1.23 and $1.25 per share. Department store JC Penny also had an increase in sales and stock prices, with their stock price rising from $1 to $1.09 (Daily Finance).
The interesting part of this story remains, how was there this much of an increase in profits, when many customers were in the middle of snowstorms? Well, the chief economist for the International Council of Shopping Centers, Michael Niemira, “Retailers weathered the storm, both literally and figuratively. It is a signal that underlying consumer demand is pretty solid” (Phoenix Business Journal). Even though large snow storms took fall over the East Coast, it not seem to phase shoppers too much. In fact, the snow storm may have forced buyers to get snow-related clothing items such as coats, scarves and boots. The snow also may have boosted the need for durable goods such as food. Costco Wholesale's sales went up 9% (LA Times), which is no doubt the need to buy foods in bulk in case of impending snowstorms.
The upcoming issues for the retail industry will be in the teen apparel department of the industry and the rising price of cotton. Teen apparel was the one area with the largest decline in sales, at 2% (LA Times). Because of this several popular teen brands such as Abercrombie & Fitch, American Eagle and Aeropostale decided to stop reporting monthly sales revenue. Their belief is that by not reporting monthly, the fluctuation of their stock will stabilize.
The price of cotton is up since 2010, and labels like GAP inc and JC Penny know that they will most likely be paying their workers in China 20% more for their products (LA Times). Other analysts caution that people will be paying more cotton goods such as sheets, socks and shirts (LA times).
Only time will tell if this recent sales increase will continue or decline as we march further into 2011.
Souces:
http://www.latimes.com/business/la-fi-retail-sales-20110204,0,160889.story
http://www.bizjournals.com/phoenix/news/2011/02/03/shoppers-not-yet-spent-retail-sales.html
http://www.dailyfinance.com/story/company-news/january-retail-sales-record-snows-couldnt-stop-sale-shoppers/19827384/
This is an interesting post, it shows how people in the US are spending but are doing it in a smarter way and saving money at the same time. Hopefully people keep spending and bring the economy back.
ReplyDeleteThe fact about the increase in the price of cotton in the near future was something that I studied in macro last semester, we studied that one of the reasons that there will be an increase in the price of cotton is because the cotton crops in Pakistan, one of the largest producers in the world, were affected by extreme flooding last year. Its so interesting how things that we think are so removed from our lives affect us in different ways.