Posts Tagged ‘consumer confidence’
Popular Consumer Confidence Measure Falls to Lowest Level Since December 2007
By Michael Lombardi, MBA for Profit Confidential
Consumer spending in the U.S. economy looks to be in trouble.
A popular measure of U.S. consumer confidence, the IBD/TIPP Economic Optimism Index fell 2.4% in May. It registered at 45.1, compared to 46.2 in April. What’s problematic is that this consumer confidence measure is only 0.7 points above the reading in December 2007, when the U.S. economy entered into a recession. (Source: Tipponline, last accessed May 7, 2013.) A reading below 50 indicates consumers have a pessimistic view of the U.S. economy.
This U.S. consumer confidence measure essentially has three different components. It asks consumers three questions: 1) how will the U.S. economy perform in the next six months; 2) what is the status of their personal financial outlook; and 3) how confident are they in federal economic policies? Of the three components, two witnessed a decline. Consumer confidence toward the U.S. economy had the biggest drop in May, down 8.5%.
As we all know, consumer confidence is essential to consumer spending, as consumers tend to hold back on their purchases if they believe economic conditions will become worse.
Another major obstacle in front of consumer spending, consumer credit in the U.S. economy grew at an annual rate of only 5.7% in the first quarter of 2013. If this rate remains the same, then 2013 will post an increase in consumer credit, which was lower than the credit expansion rate of 2012. (Source: Federal Reserve, May 7, 2013.) When consumers borrow less, they spend less.
Adding to the misery of consumer confidence, jobs growth in the U.S. economy isn’t anywhere close to what it really should be. Last month, … Read More
Retail Stocks Find Big Success in the Great Outdoors
By Mitchell Clark, B.Comm. for Profit Confidential
The great outdoors are back—big time.
Among retail stocks, it was widely expected that Cabela’s Incorporated (NYSE/CAB) would report very good earnings results. But the company didn’t just announce good earnings—it hit a grand slam.
Cabela’s is the world’s largest direct marketer of hunting, fishing, camping, and other outdoors merchandise. It is one of those retail stocks that is implementing its business plan perfectly.
It currently has 41 stores in the U.S. and three in Canada, totaling 5.4-million square feet of retail space, up 5.8% since the end of 2012.
According to the company, its sales for the first quarter of 2013 grew to $802 million, representing a gain of $179 million, or 29%, over the comparable quarter.
Not surprisingly, the company’s hunting equipment category experienced the biggest increase in sales.
The company said that its comparable store sales increased 24%, which is an outstanding performance in retail merchandising.
First-quarter earnings grew 73% to $49.8 million, way up from earnings of $28.8 million. Earnings per diluted share grew 75% to $0.70 from $0.40 in the comparable quarter.
Cabela’s five-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
While the sale of firearms and ammunition was expected to be strong, what was notable about Cabela’s first-quarter earnings performance is the strength experienced in other categories.
The company said it experienced strong growth in the sale of soft goods, footwear, optics, and archery. Excluding firearms and ammunition, comparable store sales increased nine percent, which is impressive. (See “Tills Ringing for Costco, Cabela’s—Obama Effect or Big New Trend?”)
As is the case with many corporations today, Cabela’s cash … Read More
“People Running Through the Gate” to Buy Gold?
By Michael Lombardi, MBA for Profit Confidential
As I have been writing in these pages, after a bull market that has gone on for 12 years, the recent pullback in gold bullion prices should be seen as a correction in an ongoing bull market in the metal. I see the pullback as a buying opportunity.
While news headlines flash a bearish sentiment towards gold bullion prices, the gold bears are screaming about how much money central banks have lost due to the plunge in prices and the gold miners are facing pressures. The usual gold bullion consumer countries, India and China, are seeing robust demand.
According to the All India Gems & Jewellery Trade Federation, India is experiencing its greatest demand this year as gold bullion prices have declined. (Source: Bloomberg, April 18, 2013.)
In China, customers are lining up to buy gold bullion. According to the director of sales and operations at Chow Sang Sang Holdings International Limited, the number of gold bullion products sold in the Hong Kong and Macau area during the weekend of April 13 soared 150%.
Other countries in the global economy are witnessing increased demand for the metal as well. As talk of gold bullion entering a bear market continues, consumers from countries like Australia and Japan have ramped up their gold buying.
Gold bullion sales at The Perth Mint in Australia have soared. The treasurer of The Perth Mint, Nigel Moffatt, commented on this situation by saying, “the volume of business that we’re putting through is way in excess of double what we did last week.” He added, “there’s been people running through the gate.” (Source: “Golden times for Perth … Read More
Corporate Earnings for S&P 500 Companies Very Soft for First Quarter of 2013
By Michael Lombardi, MBA for Profit Confidential
Philip Morris International Inc. (NYSE/PM), an S&P 500 company in the consumer goods sector, reported disappointing corporate earnings for the first quarter of 2013. The company’s profits fell more than 1.6% from the same period last year. Wall Street analysts were expecting Philip Morris to show corporate earnings of $1.34 per share, but the company only earned $1.28 per share. (Source: MarketWatch, April 18, 2103.)
PepsiCo, Inc. (NYSE/PEP), another major company on the S&P 500, registered first-quarter corporate earnings that were 4.7% lower than the same period last year. (Source: Reuters, April 18, 2013.)
UnitedHealth Group Incorporated (NYSE/UNH), the largest health insurer in the U.S. and a constituent of the S&P 500, reported that corporate earnings fell in its first quarter due to rising medical and operating costs. UnitedHealth earned $1.16 per share—11.4% lower than last year’s first quarter, when corporate earnings were $1.31 per share. (Source: Reuters, April 18, 2013.)
Similarly, Nucor Corporation (NYSE/NUE), a steel producer on the S&P 500, reported a drop in corporate earnings of 39% in the first quarter of 2013. The company only earned $0.28 per share compared to $0.46 in the same quarter of 2012. (Source: CNBC, April 18, 2013.)
Dear reader, throughout history, the key stock indices have risen when their companies posted better corporate earnings. As it stands, big-cap companies haven’t performed as expected; rather, I see softer corporate earnings than before. In the first quarter, the S&P 500 companies are expected to show negative growth in their corporate earnings.
In the past, to boost their corporate earnings, some well-known companies on the S&P 500 bought back their shares and cut … Read More
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