(This guest post previously appeared at the author’s blog)
Things are starting to look a bit brighter on the retail front.
Best Buy sees a strong year ahead and is planning on opening 50 to 55 large-format stores and 75 to 100 small-format stores in the U.S. It also plans to open 10 to 15 stores in China.
Indeed, strong sales at the retailer are one reason economists are optimistic about the recovery in retail sales in recent weeks. Fo example, ICSC economist Michael Niemira points to the recent gains as a result of “pent-up consumer demand.”
The rebound in wealth will boost consumer spending “notably” this year, Dean Maki, chief U.S. economist at Barclays Capital in New York, wrote in a March 12 report. He sees consumption climbing 2.2 per cent this year after falling 0.6 per cent in 2009, its biggest decline since 1974. Spending rose 0.3 per cent in February, the fifth consecutive month of increases, the Commerce Department said today.
Shares of consumer-oriented companies have surged as sales strengthened. The XLY, or Consumer Discretionary Select Sector SPDR Fund, an exchange-traded fund that includes retailers, restaurant chains and hotel companies, has risen 105 per cent since the March 9, 2009, low. The fund has outperformed the S&P 500 since late March last year, as investors placed bullish bets on consumers.
And that’s not the only area where there’s been strength. Sales in the teen segment have also been strong.
But now teen shoppers are making a comeback. For two months in a row, teen retailers have soared past sales expectations. Notably, Abercrombie & Fitch Co., known for its sexy advertising and casual-but-pricey fashions, snapped its 20-month streak of negative sales with an 8% increase in January.
Teens are hanging out at the mall after school again, goofing around with friends in dressing rooms, snacking on junk food at the food court — and giving retailers hope that they’ll help kick-start a greater wave of spending industrywide.
“Whether it be sports equipment, whether it be athletic footwear, whether it be fashion, whether it be electronics, the teen market is showing signs of life and positive growth,” said Marshal Cohen, chief industry analyst at market research firm NPD Group.
In another sign that things may potentially be turning around Gap Inc., which in recent years has struggled to re-find the mojo that propelled its meteoric rise up the retail ranks, has got a new concept it is testing. Will this be a hit? Gap acquired the Athleta brand in September 2008 for $150 million. The concept sells athlete-oriented women’s activewear online. Now Gap is preparing to test Athleta stores in the San Francisco Bay Area, according to an online job posting. The first one is planned to open in Strawberry Village Shopping centre in Mill Valley in late spring.
Still, even with all this seeming good news, there remain hiccups. Talbot’s, for example, has extended the deadline for a warrant-exchange offer that it needs to close before the company can pull the trigger on a planned $350 million private-equity-backed merger.
In other news, General Growth won an extension on a $1.5 billion loan, which will now be due in 2016.
(This post originally appeared at TrafficCourt)
(Copyright ©2009 Penton Media, Inc. Reprinted with permission of Penton Media, Inc. All rights reserved.)
Business Insider Emails & Alerts
Site highlights each day to your inbox.