Fairval

Notes on Indian equities, sectors and economy

US – Consumer demand rebounding

Posted by fairval on October 9, 2009

In a significant development, US same store sales (SSS) moved into positive territory in Sep09 after 12 negative months (a Thomson Reuters report). It should stay positive headign to the Christmas season, since last year it plunged at that time.
This could act as a positive for US markets, since it appears this is above market estimates. Says the report –

The Thomson Reuters Same Store Sales Index rose to an overall 0.6%, beating final expectations of -1.1%; the first positive in a year and the best showing since July 2008. Retailers were able to beat expectations, following easier year-over-year comparisons. The increase should not be read as “a return of the consumer,” but rather viewed in the context that retailers benefited from easier comparisons, a later start to the back-to-school season, and a later Labor Day holiday. Seventy-eight percent of retailers beat expectations, 4% percent met and 19% missed. The strength was driven by lower prices at value-oriented stores, such as Ross Stores, Kohl’s and Aeropostale. Accordingly, these retailers increased their earnings guidance.

September 2009 results are critical because they marked the beginning of easier year-over-year comparisons (negative SSS), and retailers are taking advantage of this by learning from their past mistakes. Retailers have been trying to avoid last year’s inventory disaster, as consumers remain frugal during the economic slowdown. Consequently, value retailers like Ross are successfully managing leaner inventories this year and expect continued growth moving forward. Ross expects “a 5% to 6% same store sales gain in October” (Source: ROST Press Release 10/08/09).

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