October retail salesA new reality for retailers is here, and according to October sales, it means more shoppers in stores, but they're also spending more carefully. That's not necessarily bad news for the holiday season. It's just that retailers have accepted they'll have to work hard this year to keep registers ringing.

The Commerce Department's retail and food services sales tally for October rose to $373.1 billion, up 7.3% from October 2009 and up 1.2% from September 2010. Excluding auto sales, totals were up 6% from the year-ago month, and retail-sales-only were up 7.7%. Both categories showed momentum going into the holiday season, with sales excluding autos up 0.4% from September 2010 totals and retailers up 1.3%.

The numbers bolster the optimism shown by retailers during the first week of third-quarter earnings reports, when department stores noted that increased traffic is making up for shoppers' tight budgets. The Commerce Department's tally is the most complete picture of retailing because it includes gasoline, food and auto sales, as well as the results of Walmart Stores (WMT), the world's largest retailer, which doesn't publicly report monthly sales.

Spending Is Picking Up Momemtum

"With four consecutive months of sales gains, retailers are happy to turn the page on the last three years and embrace a more optimistic future," said a statement by Sandy Kennedy, president of the Retail Industry Leaders Association, a trade group.

The numbers show the consumer is coming back, however cautiously. Experts have noted that starting in September, year-over-year comparisons are closer to apples and apples than they were in 2009, and that continued month-over-month growth shows spending is picking up strength heading into the all-important holiday shopping season.

"This continued momentum is good news for the industry, especially with Black Friday and Cyber Monday quickly approaching," Matthew Shay, president of the National Retail Federation, said in a statement. But like many industry observers, he sounded a note of caution: "While there is no question that consumer demand has improved, there are still questions about consumer confidence tied to high unemployment. We need to see improvement in key economic indicators to sustain any long-term growth."

Indeed, Lowe's (LOW), which reported net earnings increased 17.4% in the third quarter, also warned that consumer spending remains "sluggish," in the words of CEO Robert Niblock.

Discretionary Projects Are Still Small

The hardware chain reported comparable sales rose 1.9% in the quarter, thanks to increased traffic and higher average spending per transaction. But Niblock noted Lowe's customer surveys found that, while shoppers say about half their home-improvement projects go beyond just essential repairs, those discretionary projects are still small -- with most worth under $500. "The economic recovery continues to bounce along the bottom," said Niblock.

But many observers point out that some discretionary categories such as clothing stores (up 3.5% year-over-year) and food and drink establishments (up 4.3%) showed robust gains, which says shoppers are shaking off some of their fears of spending.

Consumers are in a better position to spend now, but the categories doing better are those that can be bought with cash, not credit, notes Brian Sozzi, retail analyst at Wall Street Strategies. He says furniture and electronics store sales were down 0.7% below September because consumers aren't loading credit onto their household accounts to buy large furniture or home electronics packages, he said.

Many observers have previously highlighted the "new frugality" among consumers that has led many households to continue saving and paying down debt, rather than using credit to spend on big-ticket items. As long as unemployment remains high, that could turn into a longer-term condition.

"That lack of re-leverage underscores the lingering uncertainty on the part of the consumer," Sozzi says. "Until that tide turns, retail sales will be stuck in a 'new normal' rate of growth."

Increase your money and finance knowledge from home

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Behavioral Finance

Why do investors make the decisions that they do?

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Support America....Buy US made products. Don't get in the hole to the banks either.....

November 16 2010 at 12:59 PM Report abuse +1 rate up rate down Reply

This says it all: Paste it into your browser, watch it and cringe! http://www.youtube.com/watch?v=Yde_wYkhCm8&feature=player_embedded

November 16 2010 at 9:22 AM Report abuse rate up rate down Reply

I have to say that there is not a lot of product in the stores. I go in looking for things and they just don't have a lot to choose from. I understand from a store view that you can't keep a lot of inventory. I think not having a lot will make sales slimmer.

November 16 2010 at 8:04 AM Report abuse +1 rate up rate down Reply

I've been buying Xmas presents slowly, since September. The amount per present and quantity of presents are significantly smaller than in past years. I told my son that presents for his kids were to be $50 or less whereas in the past I thoght nothing of buying expensive electronics and concert tickets. Everyone, includng the kids will manage and perhaps along the way we will discover something new like the joy of family.

November 16 2010 at 7:00 AM Report abuse +2 rate up rate down Reply

McConnell has long defended the practice, in which a member of Congress sends federal money to a specific project, as the legislative branch's constitutional right to direct constituents' tax dollars toward relevant projects. But McConnell reversed course Monday under pressure from tea party activists and Sen. Jim DeMint (R-S.C.), who announced that he had enough votes in the GOP caucus to pass a resolution banning the practice among Senate Republicans, even over McConnell's objections. ************************ LOL! Which way is the wind blowin' Mitch???

November 16 2010 at 6:02 AM Report abuse +2 rate up rate down Reply

You have to have American made products to get my cash.

November 16 2010 at 3:40 AM Report abuse +3 rate up rate down Reply

It's good the consumer is being smarter about buying. I wish that were taken one step further and only buy "Made in America". It might be a little more expensive, but it just might send the message to corporate America that sending the manufacturing out of the US is going to cost them. There are plenty of people that want to make their products here, but their raw material supply houses are failing or shipping out. One by one, if you ask the retailer where their "Made in America" stuff is, and shop there....you might start making a difference. They don't have it? Walk out of the store. UNITED States. Remember?

November 16 2010 at 1:14 AM Report abuse +4 rate up rate down Reply

Oh yeh the Chinese got jobs the Mexicans got jobs and yes even the South Koreans got jobs but at the expense of American wrokers!

November 16 2010 at 12:38 AM Report abuse +4 rate up rate down Reply

Oh yeh the Chinese got jobs the Mexicans got jobs and yes even the South Koreans got jobs but at the expense of American wrokers!

November 16 2010 at 12:38 AM Report abuse +2 rate up rate down Reply

Oh yeh the Chinese got jobs the Mexicans got jobs and yes even the South Koreans got jobs but at the expense of American wrokers!

November 16 2010 at 12:38 AM Report abuse +1 rate up rate down Reply