Christmas shopping for bargainsAs retailers start releasing their latest quarterly earnings this week, don't expect too many fireworks. After a holiday season that marked a return to some form of normalcy, merchants are bracing for a year of mild sales growth and more stable operations.

Consumers are spending again, but still shopping carefully, as the major merchants' January sales reports showed earlier this month. Tuesday's release of Commerce Department retail numbers for January will likely underline that dynamic, just as merchants begin reporting fourth-quarter and fiscal-year earnings. The Commerce numbers are the most complete picture of retail because they include gas, food and auto sales, as well as the results of Walmart (WMT), the world's largest retailer (which doesn't publicly report monthly sales).

"We're not completely out of the woods, particularly for housing-related spending, but I think retail has largely recovered from the 2008 recession," says Kamalesh Rao, director of economic research for MasterCard Advisors SpendingPulse.

"A Good Sign"

According to SpendingPulse numbers, which tend to mirror the Commerce Department tally, January sales excluding autos and gasoline were up 4.6% over January 2010, the best yearly increase since April 2010. The growth rate for the three-month period was 4.9% above the year-ago period, the best quarterly growth since August 2007, according to SpendingPulse, which tallies sales by payment forms including credit, cash and check.

"I think we've finally managed to dig ourselves out of that trough in the recession," says Rao.

"A lot of the momentum we generated through the holiday season seems to have sustained itself. That's a good sign for consumer spending," he says. Sales in January were up 1.8% over December, reversing a slowdown in month-over-month growth, which indicates sales momentum gathered steam despite the inclement weather last month, notes Rao.

"Singles and Doubles"

Whether that momentum holds is an open question, given the state of the housing and job markets, say industry observers. As the retail earnings season begins, analysts note that merchants will have to focus more on holding down costs and operating more efficiently, rather than look for sales increases to boost profits.

"This year will be characterized not by home runs, but by singles and doubles," said Credit Suisse analyst Gary Balter in a note to investors. He said the stock prices of mall anchor stores had gone up 40.5% in 2010 after rising 228.3% in 2009, but that pace can't hold up for a third year. Comparisons will be harder this year, with gross margins having made it back to their pre-recession peaks, he wrote.

Mass merchants are under pressure from rising costs for goods, higher energy prices and price-sensitive consumers who are comparison-shopping more aggressively online, Balter explained. He recommended mass retailers such as Family Dollar Stores (FDO) and Costco (COST) that offer shoppers something beyond low prices, over retailers such as Walmart that are focused more narrowly on prices.

As the merchants report earnings, analysts will likely want some forecasts for spring sales -- especially the key Easter sales period -- as a gauge of consumer activity. Major retailers were tight-lipped when reporting January sales, even as several upgraded their guidance for fourth-quarter earnings.

"Even though we're talking about a rebound and pretty sustained momentum, we're still talking about a consumer that's far more selective and far more choosy than they were pre-recession," says Rao. "The sustainability of momentum is a question mark right now, but we have good signs."


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Dereck

Major Fraud Alert


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May 29 2011 at 1:23 AM Report abuse rate up rate down Reply
bhawkes328

DREAM ON DARLING... THINGS ARE STILL GOING DOWN HILL... HOLD ON FOR THE RIDE

February 15 2011 at 9:36 AM Report abuse +3 rate up rate down Reply
k4jlp

YEAH, THE RETAIL OF PRICE OF GASOLINE CONTINUES TO RISE FOR NO REASON OTHER THAN GREED FROM SPECULATORS WHO CAN AT A WHIM JACK THE PRICE...

February 15 2011 at 7:36 AM Report abuse +2 rate up rate down Reply
Harold

I mean not to insult this great wisdom, however retail sales depends largley on the sale of clothing items, I.E sweaters, socks, jeans, and the like. However, I feel the author grossly underestimated cotton futures, it seems this economic geunus believes that these items are grown on trees. The sad fact remains that cotton demand is skyrocketing, clothes, and a good percentage of them are made with cotton, and the supply is short which means less clothes made which in turn means higher prices. Remember people seek, when buying clothes to have cheaper prices, this will not happen, thus clothes will no longer be a purchase one can easliy take for granted. Retail will be in deep trouble when we see the results of this cotton shortage, and a possible pending oil price hike will also add to a higher price, because it will now cost more to ship the raw materials needed to make the actuall items. Again someon should tell the writer that there is no such thing as a cashmere sweater tree, maybe in her world, but not in mine. What wonderful talent the news attracts these days.

February 15 2011 at 4:39 AM Report abuse +1 rate up rate down Reply
martinsportraits

WHAT UPTREND?????????....More Bullsh*t

February 15 2011 at 3:46 AM Report abuse +5 rate up rate down Reply
lauracerny

If you are planning a mortgage refinance then you should search online for 123 mortgage refinance before you decide they found 3.25% refinance with bad credit history and also did instant analysis of my mortgage.

February 15 2011 at 2:31 AM Report abuse rate up rate down Reply
cblaha1219

I think there is something to factor in -- that I haven't seen in many articles. I'm a baby boomer and I set last birthday, my retirement date. And in doing so, this was a time to reflect-- I do not need any more business suits, purses or shoes -- and have enough to last my retirement date-- even though it is 6.75 years out there. In fact, I want my biz clothes to wear out so I don't have to deal with them. So-- retailers -- you are soon going to find other baby boomers saying the same thing. Prepare and plan! I, as a buyer am. I view every purchase with an eye to the future. And to the hobbies I want to occupy my time with in 6.75 years..

February 14 2011 at 9:18 PM Report abuse +1 rate up rate down Reply
ultraz2

Beware of teaser credit card intrest rates, they are designed to sting you big time if they are not paid off in time.

February 14 2011 at 9:01 PM Report abuse +3 rate up rate down Reply
pmurph2000

Sure sales are up. People have a little extra cash in their pockets because they're not making their mortgage payments!

February 14 2011 at 8:45 PM Report abuse +5 rate up rate down Reply
ultraz2

Yes the HUGE WALL STREET CRASH of just a little over two years ago crippled middle class american workers pension savings. Many now will no longer be able to retire at age 62. Maybe not even at age 65.Sad how crooked politicians on Capitol Hill have voted to continue doing business as usual and are leading our Nation into bankruptcy by catering to the rich, which are tax the most but do not pay their fair share due to tax avoidance loopholes the US Congress and the US Senate allows them. The USA is being led into bankruptcy by crooked politicians on Capitol Hill. Both parties are crooked as hell.

February 14 2011 at 8:32 PM Report abuse +6 rate up rate down Reply