Investors Are Buying Into Retail Stocks
Friday, August 22, 2008SUSIE GHARIB: Retail stocks also did well today. Some investors are becoming more optimistic about the sector, which has performed poorly this year. As Suzanne Pratt reports, the back-to-school season should offer retailers and investors clues about the crucial Christmas holiday shopping period.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: At K-mart in midtown Manhattan, the back-to-school season is in full swing. Store manager Charlie Moore says consumers have been opening their wallets.
CHARLES MOORE, STORE COACH, KMART: It is a travel destination, so we do get a lot of tourists in the store, but overall the back-to-school shopper is definitely in the store in the last couple of weeks.
PRATT: But many analysts are seeing different patterns and are pessimistic about back-to-school. Sales estimates for the July through September period range from down a few percentage points to up a few percentage points. Citigroup analyst Kimberly Greenberger says slow mall traffic in August points to a sluggish season.
KIMBERLY GREENBERGER, SPECIALTY RETAIL ANALYST, CITIGROUP: Budgets are tight. Energy prices are still high even with the recent declines in gasoline prices and food costs are going higher. So consumers are feeling the pinch in their household budget and they're probably deferring any of that back-to-school shopping expenditure that they can.
PRATT: The back-to-school season is the second busiest period of the year after the winter holidays. Retailers look to the new school year for insight about how much shoppers might spend during the holidays and what they might buy. Experts say there is a strong correlation between back-to- school and holiday sales. And with back to school looking weak, expectations are low for this year's holiday season. Analysts say retailers are prepared for the worst.
GREENBERGER: Inventories are being very tightly controlled and most companies and most retailers are managing their expense budgets, assuming that sales will be tough.
PRATT: Consumers are heading to discounters and electronics stores for back-to-school items -- popular shopping destinations all year. Experts predict that trend will continue during the holidays. UBS analyst Brian Nagel believes consumer electronics will be one of the few bright lights when Santa comes to town.
BRIAN NAGEL, RETAIL ANALYST, UBS: When I think about consumer electronics, I think we're still in a very healthy product cycle, to the extent that people are buying gifts either for themselves or for other people I think consumer electronics stands out as a purchase. We have a solid gaming cycle, with gaming hardware and software doing well. I think TV's are still quite popular with consumers.
PRATT: Experts say the lack of a hot fashion trend this year is one more reason back to school and holiday shopping may be lackluster. A must- have item can sometimes inspire shoppers to ignore economic headwinds. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
