Thursday, August 13, 2009

Cash for Clunkers Can’t Save July Retail Sales Figures - Sales Fall 0.1 Percent

Retailers reported a rough month in July, raising concerns for how strong the recovery from the worst recession since World War II. Outside of auto sales figures, boosted by the very popular and well publicized “Cash for Clunkers” program, retailers turned in a disappointing performance in July. The Commerce Department reported retail sales fell 0.1 percent last month, a much worse performance than economists had expected.

Sales unexpectedly lower

Retail sales had been expected to rise in July, boosted by the federal government’s “Cash for Clunkers” program. Most economists expected a very slight increase in non-auto retail for July, so the 0.1 percent drop came as a surprise.

Shoppers still hesitant to open wallets

Reports from the nation’s major chain retailers showed shoppers remained cautious about spending in July, as most consumers aren’t feeling like they’ve seen the last of the recession, and job security fears dominate peoples thinking. The next hurdle for retailers will be whether shoppers will cut back on back-to-school shopping. This could be a indicator of how good the holiday season will be for retailers. Congress approved an additional $2 Billion for “Cash for Clunkers”, and retailers are hoping some of the popularity of that program will spill over into enthusiasm for spending at retail stores. Cars and light truck are selling at the best rate since last September, boosted by the government program.

Unemployment expected to climb

Economists are forecasting that the unemployment rate, which dipped to 9.4 percent in July, will rise to over 10 percent early next year. The Federal Reserve, concluding its first meeting since the economic uptick, held a key interest rate near a record low where it has been since last December and pledged to hold rates at low levels for "an extended period

Wednesday, August 12, 2009

McDonalds July Sales Sizzling Hot

McDonalds (NYSE:MCD) reported a 4.3% increase in same store sales for July. Same store sales are considered the most important comparison statistic for multi unit restaurant chains and retailers. Here in the US, Same store sales rose 2.6%, which is being attributed to the new line of McCafé Espresso-based coffee drinks. McDonalds stock closed today at $56.02 a share, significantly off the 3 month high of $60.99 on June 3rd.

McDonalds is now switching advertising emphasis back towards value and meal combinations, although the “McCafĂ© Monday” promotion that ran in July through August 3rd, giving away samples of specific coffee drinks on Mondays, turned out to be a good traffic driver, according to anecdotal evidence. The new launch now is 1/3 pound Angus Beef burgers, with a higher price point that McDonalds traditionally hits. The “Any size fountain drink for $1” has been a good component to the value message.

While restaurants overall are struggling in the economic climate, fast feeders, and McDonalds in particular, have acquitted themselves well. Americans love to go out to eat, and it seems that the casual dining houses are feeling the brunt of the crisis in consumer confidence. McDonald turning in a 2.6% same store sales increase in the US market, when the US GDP shrank 1% in the second quarter, shows that the Golden Arches continue to be a family destination and place for value conscious consumers to go.