Wal-Mart (WMT), Kohl’s (KSS), JCPenney (JCP), TJX (TJX), CostCo (COST) and BJ’s Wholesale Club (BJ) all reported strong same-store sales numbers for April. On the surface, this appears to suggest that the American consumer is doing OK. But the markets weren’t impressed (only Wal-Mart’s stock is up). So what gives?
A) US Credit card debt continues to balloon. American consumers are still buying stuff with cash they don’t have (they’ve just switched their source of financing from houses to credit cards). In the long-run, this is not sustainable.
B) People may already be spending stimulus checks they don’t have. Any expected bump from the stimulus checks may be muted. After people pay off their gas and credit card bills with their checks, there won’t be much left anyway.
C) Easter fell in March this year, adding an extra shopping day to April–a statistical boost that has nothing to do with consumer well-being.
D) Warm weather in many parts of the country helped sales–also not a sign of a consumer turnaround.
In short, American consumers are still reeling, and if they collapse, they’ll take 70% of the economy’s spending with them. Cnn.com gets it right:
“It’s false hope to think that these numbers show that a rebound is about to take place in consumer spending,” said Ken Perkins, president of sales tracking firm Retail Metrics, adding that there are still too many “headwinds” constraining consumers’ discretionary budgets.
Specifically, Perkins pointed to four months of job losses, record-high gas prices, higher food prices, tighter credit availability and declining home values as the primary culprits.