Retailers Look for Stronger Sales as US Economy Grows
UNITED States retailers are hanging up their holiday season decorations with a bit of extra zip these days: the nation's biggest chains are anticipating brisk sales between now and Christmas, better than they had expected a month or so ago.
What has cheered them up is a rise in consumer confidence and an economy showing a few signs of a rebound.
Late last week the government announced that retail sales in the US rose 0.9 percent in October. That's almost double the 0.5 percent gain in September. The October increase was the fourth monthly jump in a row, and the largest since July.
The October results point to healthy sales through the important Thanksgiving-Christmas holiday period, says Janet Mangano, a retail specialist with Burnham Securities Inc.
Many retailers, she adds, have benefitted from an increase in store sales without costly new advertising outlays, tight inventory controls, lower interest costs for the major chains, and extensive restructuring programs in recent years. Gains in per-store profits come as much from careful management practices as from actual increased consumer spending, she says.
The October sales increase came despite little growth in personal income for most Americans.
According to the US Department of Labor, nonfarm hourly wages rose only 0.2 percent in October. But Americans are working slightly longer hours. That means a little extra pay to use for needed purchases.
"We don't know the source of the funds" used by consumers to make purchases in October, Ms. Mangano says. Some of the money "may have come from extensive refinancing of homes that has occurred in parts of the US." Other possible sources include more borrowing or less saving.
A University of Michigan survey showed a substantial increase in consumer confidence between the end of October and post-election November.
Indeed, the university's overall index of confidence has regained all the loss of confidence registered since mid-1991, according to one analyst. One reason may be the end of uncertainties connected to the election.
Another positive note last week was a government report that the number of Americans filing new claims for jobless benefits fell to a two-year low in late October and remained under 400,000 for the sixth consecutive week.
The biggest retail sales gain in October was for automobiles, up 2.9 percent. That positive trend continued into the first 10 days of November. Sales of domestically built vehicles rose 21.6 percent from the previous 10-day period. Sales were also up in October in other sectors including clothing and furniture.
Many analysts now say that retailers could have their best year since 1988 in terms of sales and profits.
Gary Balter and Stacey Herschaft, analysts for Donaldson, Lufkin & Jenrette Securities Corporation, say a number of factors are converging to push higher sales. These include a perception that President-elect Clinton will develop programs to boost the economy. Lower interest rates may enable households to reduce debts or borrow more.
Cold weather in some parts of the US has also given a boost to apparel sales. Women's clothing, including women's sportswear, has been strong.
This holiday season will also be helped by the calendar. There are two extra shopping days between Thanksgiving and Christmas compared to last year.
Many retailers make roughly half their annual profits in the period just ahead, between mid-November and the end of the calendar year, Mangano says.
Wal-Mart, the nation's largest retailer in terms of the number of stores and total sales, continues to expand. The company now has operations in 44 states. Analysts for Salomon Brothers believe that Wal-Mart will become the largest US corporation by the year 2000. Sales are expected to reach $200 billion, with net income of $7 billion. It would surpass the nation's largest manufacturing company (General Motors) and its largest energy company (Exxon).