The Pulse of the Economy is Retail
By David Dorf on Apr 22, 2009
Everyone wants to know if the economy has hit bottom, and we're all looking for the signs. Retailers have been hit particularly hard by the recession, with many reporting sales slumps not seen in years. Several retailers have recently announced the worst is over. They stop short of saying the economy is back on track, but at least its not getting worse. Stability is the first step toward recovery.
Tesco, Britain's largest retailer, saw signs of stability in Asia and Europe, but their results were dragged down by their new US-based chain, Fresh and Easy. Nevertheless, they saw a worldwide sales increase of 15%. Coach, Macy's, and Target are also no longer experiencing deteriorating sales. Of course calling the bottom is not the same as starting the recovery. We could move sideways for a while as employment improves, credit frees-up, and consumer confidence builds.
Mike Duke, Walmart's CEO, spoke with Matt Lauer on NBC's Today Show (see video below).
As they toured a new Walmart in King of Prussia, Pennsylvania they discussed signs of the economy. Mr. Duke mentioned several measures to watch:
* Sales of expensive cuts of meat are down. Presumably when people have more money, they will buy better steaks.
* Adult apparel sales are down, but not childrens' clothing. Parents are willing to make sacrifices for themselves, but not for their kids.
* Consumer electronics are still strong. This may be because families are forgoing vacations and saying home with the HDTV and Wii.
* Vitamins are selling well, possibly because workers can't afford to get sick and miss work.
* Cash sales have increased as a percentage of total sales, probably because credit limits are tighter.
Although Walmart's Duke would not say he saw the recovery in sight, he gave us some interesting signs to watch.