Rapaport Magazine

U.S. Consumer Confidence Edges Up

Retail Bulletin

By Rapaport
The Conference Board Consumer Confidence Index® rose slightly in October to 50.2 points, up from 48.6 points in September. The group’s Present Situation Index increased to 23.9 from 23.3 points and The Expectations Index improved to 67.8 from 65.5 points.

“Consumers’ assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve,” Lynn Franco, director of The Conference Board Consumer Research Center, explained. “And despite the uptick in Expectations, consumers continue to be quite concerned about the short-term outlook. Both present and future indicators point toward more of the same in the coming months.”

Only 16 percent of consumers anticipate that business conditions will improve during the next six months, while 14 percent expect that conditions will worsen.

ICSC Predicts Christmas Sales Increase

The International Council of Shopping Centers (ICSC) is forecasting that U.S. chain-store sales for the 2010 Christmas season will increase in the range of 3 percent to 3.5 percent compared with Christmas 2009. ICSC’s projection pertains to same-store sales, or stores that have been open for at least one year. ICSC forecast that U.S. shopping center sales will grow 3 percent year on year, which would mark the strongest gain since 2006.

Theo Fennell’s Sales Rise

According to Retail Week, British luxury jeweler Theo Fennell is on track to return a profit thanks to a program of investment in its stores and at its website and the introduction of an entry-level range of products. After a reduced loss of $400,000 (GBP 250,000) in 2009, the company reported that sales for the first six months of its fiscal year, which started on April 1, were up 11 percent.

Seymour Pierce analyst Freddie George is forecasting the retailer will report a return to growth via a pretax profit of between $800,000 and $1.1 million (GBP 500,000 and GBP 750,000) for the full year. — Additional reporting provided by Acquire Media.

Luxury Consumption Index Retreats, Reflects Gloomy Mood

In Unity Marketing’s exclusive Luxury Consumption Index (LCI) for October, affluent consumer sentiment retreated 6.2 points to 72.1 points.

“Luxury consumers started 2010 with a feeling of optimism that the worst of the economic turmoil was over,” said Pam Danziger, president of Unity Marketing and author of the upcoming book, Putting the Luxe Back in Luxury. “But through the course of the year, reality hasn’t lived up to those expectations, so we have seen a retreat of the LCI throughout the year.”

Danziger specifically took aim at the “robust luxury forecast” by Bain. “The word from Bain is that the luxury goods sector’s ‘recovery has been faster than expected.’ I disagree. The affluent consumers surveyed show a very reserved and cautious attitude about future luxury spending. Nearly half (49 percent) expect to spend the same on luxury in the next twelve months and about one-fourth (24 percent) say they will spend less.”

Small Business Remains in Recession

The National Federation of Independent Business (NFIB) reported that the level of optimism for small businesses in the U.S. remains in “recession territory.” The Index of Small Business Optimism gained just 0.2 points in September to 89 points. The most recent time the index stood at 100 points or higher was October 2006.

The small U.S. businesses surveyed said the biggest problem they face, for the second year in a row, is a lack of sales. The second and third most pressing issues were taxes and government requirements, the same to be cited in the September 2009 survey.

LVMH Watch & Jewelry Revenue Gains

LVMH Moët Hennessey Louis Vuitton reported that revenues from its watch and jewelry division rose 30 percent year on year to $343.2 million (EUR 244 million) in the third quarter that closed on September 30, 2010. Total sales for the third quarter rose 24 percent year over year to $7.12 billion (EUR 5.1 billion). Same-store sales were up 14 percent. The company noted that overall growth continued to be very strong in Asia, Europe and the Americas.

U.S. Jewelry CPI Reaches New High

The Consumer Price Index (CPI) for jewelry in the U.S. rose 3.7 percent year on year to approximately 163.7 points in September, its highest level ever recorded. The reading, as tracked by the Bureau of Labor Statistics (BLS), marked the 32nd consecutive month for which the jewelry CPI registered more than 150 points and the fifth month this year that it topped 160 points. The jewelry price index is based on the reference point of average prices in 1986, which is set at 100 points.

Online Jewelry Sales Fluctuate

MasterCard Advisors’ SpendingPulse, a macroeconomic report tracking U.S. retail and service sales, noted that while September sales in most categories recorded a slight year-on-year increase, luxury and jewelry product sales declined. SpendingPulse’s Luxury ex-Jewelry Index fell by 5.4 percent in September, marking the sector’s second consecutive decrease. Online jewelry sales fell 5.9 percent.

For the third quarter that ended on September 30, however, online retail sales in the U.S rose 9 percent year on year to $32.1 billion, according to comScore Inc., marking the fourth consecutive quarter of positive growth following a full year of flat or negative growth.

Zale to Record $46 Million Charge

Zale Corp. will record charges totaling $45.8 million for its fiscal first quarter that ended on October 31, according to the Dallas Morning News. The first charge is a $25.5 million payment to Golden Gate Capital to modify a loan agreement and remove a requirement that the struggling jewelry retailer meet minimum earnings beginning in January. The remaining $20.3 million balance represents the additional amount Zale paid when warrants associated with the loan were valued, giving Golden Gate a 25 percent stake in Zale’s common stock.

— Additional reporting provided by Acquire Media.

HSBC Extends Credit Card Services

HSBC North America extended its long-term contracts with Neiman Marcus Group and Helzberg for ongoing, merchant-branded credit card services. The bank extended Neiman Marcus Group’s contract to 2015 and its six-year-old contract with Helzberg Diamonds into 2013.

Consumer credit represents a significant percentage of the Neiman Marcus Group’s sales, culled from Neiman Marcus and Bergdorf Goodman credit cards, while Helzberg Diamonds’ “Preferred Card” program provides access to special purchase offers, as well as exclusive benefits and financing options.

Article from the Rapaport Magazine - November 2010. To subscribe click here.

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