Retail's Woes Aside, Consumers Are Actually Doing Well
Despite the fact that major department stores like Macy's (M) - Get Report and Nordstrom (JWN) - Get Report served up less-than-stellar third quarter earnings reports, and the October retail sales number missed Wall Street's consensus forecast, the American consumer remains robust and ready to spend this holiday season, said Eric Wiegand, senior portfolio manager at U.S. Bank.
"It's a frustrating environment because it is somewhat uneven, but the consumer tends to be in very good shape right now," said Wiegand.
Consumers are generally interested in maintaining healthier personal balance sheets, Wiegand said, and are also spending more on experiences compared to clothing. He noted that restaurants and travel destinations continue to do well, often at the expense of retailers in the local mall.
Not helping retailers are the lack of clear trends or must-have items for this holiday season. As a result, Wiegand said, there is already a lot of discounting taking place as retailers struggle to strike the right chord with their clientele. Furthermore, he said the warm autumn weather so far has hurt apparel sales, especially at higher-end stores.
Among the areas that have not seen significant drop-offs in spending are big-ticket purchases like cars. Wiegand attributes this to the low interest rate environment and a more conservative consumer.
"The average age of an automobile in the United States is over 11 years, we are getting to the end of the useful life of a lot of these cars," said Wiegand, adding that a serious spike in interest rates could chill the market for cars, appliances and homes.
Finally, Wiegand said that October's stock market rally had emboldened both investors and consumers, but it also likely borrowed -- or stole -- returns from November and December.
"We did have the Santa Claus rally early, and some might refer to this as the 'Santa pause' as we tend to be somewhat volatile but somewhat flattish as we move into year-end," said Wiegand.