Economy Watch: Good News, Bad News for Retailers

Some good news: Whole Foods Market Inc. said that its fiscal second-quarter profit more than doubled compared with the same period in 2009, jumping from $27.3 million to $67.4 million.

May 13, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Joe Marinaro

There was good news and bad news for various retailers on Wednesday. Some good news: Whole Foods Market Inc. said that its fiscal second-quarter profit more than doubled compared with the same period in 2009, jumping from $27.3 million to $67.4 million. Same-store sales, an important metric for retailers, rose 7.7 percent for the quarter ended April 11.

Also good: The much-beleaguered department store sector–which was taking its lumps even before the recession–saw Macy’s post net income of $23 million for the quarter ended May 1, compared with a loss of $88 million during the same period last year. Same-store sales grew 5.5 percent.

On the other hand, the Los Angeles city attorney’s office has filed criminal charges against Ralphs, a major SoCal supermarket chain, and its parent company Kroger Co., accusing the store of regularly shorting customers for prepackaged and weighed products. Secret shopper inspectors from the county’s weights and measures department have been visiting area stores, and they apparently didn’t like what they found. Kroger has said it, too, is investigating the situation.

More Goods on the Go, Says Railroad Association

A little-noticed economic indicator that also has CRE implications is the Association of American Railroads’ Rail Time Indicators Report. The most recent one, out on Wednesday, noted that all 19 major commodity categories saw higher carloads in April compared with the same month last year, marking a first since the association began keeping track of such data in 1989. Also, on a seasonally adjusted basis, U.S. rail carloads in April were up 0.5 percent compared with March 2010, while intermodal was up 1 percent from last month.

More rail carloads moving around the country points to more economic activity of various kinds, particularly the kinds that affect industrial and retail real estate. It hints at greater U.S. energy use as well, since one of the commodities tracked is coal–and it was up 7.1 percent compared with the same month last year.

“Last month’s favorable results come with a footnote that April 2009 was a particularly bad month for rail traffic,” AAR senior vice president John Gray said in a statement. “That said, rail traffic last month suggests the early phase of a broad-based recovery is under way. Although the recovery may not be happening as quickly as we’d like, conditions are better today than they were even a few months ago.”

Long-Term Scars From the Great Recession?

The historically slow recovery of the economy and lack of substantial job growth could cause negative, lasting effects on the current young generation and force many retirement age individuals to remain in the workforce, according to a study released this week by the Mortgage Bankers Association.

The study, entitled “Household Reaction to the Financial Crisis: Scared or Scarred?,” was conducted by Joe Peek, Gatton Endowed Chair in International Banking and Financial Economics at the University of Kentucky, and sponsored by the Research Institute for Housing America. It analyzed how Americans will respond to the current crisis in terms of consumer spending, saving rates, credit supply and implications for the strength of the economic recovery.

The short answer: a whole generation has been spooked, and that will be a drag on the recovery. “Such headwinds to a strong economic recovery are likely to have lasting impacts on the values and behavior of the current generation, much as the Great Depression had on its generation,” predicted Peek.

Wall Street continued to march back to its pre-Greek highs on Wednesday, with the Dow Jones Industrial Average gaining 148.65 points, or 1.38 percent, to put it within striking distance of 11,000 again. The S&P 500 rose 1.37 percent and the Nasdaq advanced 2.09 percent.