October retail sales climb 0.5%, forecast a strong holiday shopping season

Economists had projected that October U.S. retail sales would be up by 0.4%, according to a survey by Briefing.com. Numbers released by the Commerce Department this morning showed actual sales up 0.5%.

I think that’s enough to keep the optimism flowing for the end of the year holiday shopping season. And to sustain belief that the U.S. economy is stronger than anyone expected back in August. As I read these numbers, they point to GDP growth above 2% for the fourth quarter.

The big drivers were sales of consumer electronics and cars. Sales at electronics retailers climbed 3.7% in October. That’s the fastest rate of growth since November 2009. Sales at auto dealers climbed by 0.4% after an increase of 4.2% in September. That added up to a 13.2 million annual sales rate in October, the highest since February and up slightly from the 13.04 million annual rate in September.

We also had good news on the inflation front this morning as well. The producer price index, a leading indicator of inflation at the consumer level, dropped by 0.3%. That was a bigger drop than the 0.1% that economists had projected according to a survey by Bloomberg and the first decline in four months.

Now the big question for the holiday retail season is how deep the discounts will be. Too deep and the stores will be full of shoppers but retailers won’t be making much money.

Update Coach (COH)

Coach (COH) has successfully gone global. I think that’s the message in the September quarter results reported on October 26.

The company ended its June fiscal 2010 year with 20% of the U.S. handbag market and a 16% market share in Japan. Sales doubled to $100 million in China (where the company has a 4% share of the accessories market) and the company began to increase its penetration of the United Kingdom and continental European markets.

In the September quarter (the first quarter of the company’s 2011 fiscal year) the company reaped early returns from that strategy and continued to push its global strategy.

For the September quarter the company reported earnings of 63 cents a share, beating the Wall Street analyst consensus by 8 cents a share. Earnings per share grew by 43% from the first quarter of fiscal 2010. Revenue came in at $912 million, up almost 20% from the first quarter of fiscal 2010 and well ahead of analyst expectations for $847 million.

The company finished the quarter with 345 retail and 128 factory-outlet stores in North America, 169 stores in Japan, and 49 stores in China. Read more

It’s getting to look a lot like an OK Christmas.

The big shipping companies that should know are saying that this holiday shopping season will be decent. Now that may not be enthusiastic enough to set visions of sugar plums dancing in your head, but the retail group at Deloitte projects that U.S retail sales will increase by 2% from the 2009 levels during the November to January holiday shopping season. That compares to a 1% increase in holiday sales last year.

As I said, an OK Christmas.

Shipments are solid, FedEx, the world’s second largest package shipping company told Wall Street back on September 16.

Delta Air Lines, which carries for airfreight than any other U.S. airline, told Bloomberg that it will have a “perfectly decent” holiday season.

Li & Fung, the Hong-Kong-based company that is the biggest supplier of clothes and toys to retailers such as Wal-Mart and Target told Bloomberg “It’s a lot better than last year, our orders are way ahead.”

Retailers, according to the shippers, are rebuilding inventories that had dropped to near record lows in anticipation of the holiday shopping season.

And some of them are actually hiring—temp jobs, of course. Toys R Us, for example, plans to hire 45,000 workers for the holiday period. That’s 10,000 more than last year.

Update Coach (COH)

Good sales and earning numbers from Coach (COH) for its fiscal second quarter but Wall Street wanted more and the stock was down almost 6% as of 11:15 in New York.

The pattern here of sell even on the good news reminds me of the market’s reaction to Intel’s (INTC) good earnings report last week. I used that selling as an opportunity to pick up shares of Intel. I’d think about doing the same with Coach. (The stock is already a member of the Jubak’s Picks portfolio.) For more on that sell on the good news at Intel and my buy on the shares see my post http://jubakpicks.com/2010/01/15/buy-intel-intc/

Earnings per share at the retailer climbed 12% from fiscal second quarter a year ago. Earnings of $241 million, or 75 cents a share, were up from $216.9 million, or 67 cents a share, a year ago. Revenues grew by 11% to $1.07 billion. Wall Street had projected earnings of 72 cents a share on revenues of $1.03 billion.

The best news for Coach was that sales in its home North American market finally rebounded. Same store sales in North America climbed 3.2% for the quarter.

Margins climbed in Coach’s North American outlets and gross margins for the company as a whole inched up to 72.4% from 72.1%.

In China, the key growth market for the company Coach continued to expand by opening four new stores in the quarter. That brought the company’s total in China to 37 stores. (In contrast Coach has 163 stores in Japan after opening one new store in the quarter.)

So where was the disappointment? Read more

Now it’s the retailers’ turn to speak–I don’t expect to hear much happy talk

On Thursday August 6 retailers will report same-store sales for July. The numbers are likely to be just more of the same ugly digits reported in June. Bad weather hasn’t helped. Labor Day doesn’t come until Septemvber 7 this year, delaying the back to school shopping of even the earliest of early birds.

Oh, and then there’s that recession thing going on.

Goldman Sachs is projecting that comparable sales will fall about 5.5% from July 2008. (All these numbers now exclude Wal-Mart, which has stopped reporting monthly numbers.) That would keep up the string of 4% to 5.5% declines that now goes back to December. Read more