US retailers facing spending squeeze

Click to follow
The Independent Online

Retailers gave a downbeat assessment of the American consumer economy, as Wal-Mart said that shoppers were making fewer trips to its stores and Home Depot, the DIY giant, issued a profit warning.

The twin statements came alongside two surveys showing weaker spending and consumer confidence.

But investors were cheered that Wal-Mart at least was managing to squeeze higher profits from its business despite the economic weakness.

By running down inventories and starting the Christmas sales early, America's largest retailer posted a better-than-expected quarterly profit and predicted robust earnings over the rest of the year.

"We are realistic about the environment we are operating in and competing in," said Wal-Mart's chief executive, Lee Scott. "During the past few months, we've prepared for a more challenging and tougher macro environment, and we believe we are well positioned to win in this environment."

Meanwhile the slowdown in the housing market has been having an impact on Home Depot. The DIY chain said yesterday it would have to delay the next tranche of its share buy-back programme because of disappointing profits.

Frank Blake, chief executive, told Wall Street analysts: "We started the year with a more pessimistic view of the housing and home-improvement markets. It turns out we were not pessimistic enough."

Home Depot's sales fell for the second successive quarter – the first time since 1982.

Across the retail industry, consumer spending was up just 0.2 per cent last month, according to a survey released yesterday by SpendingPulse. That was a sharp slowdown from September's 0.6 per cent.

Meanwhile, TechnoMetrica Market Intelligence said its index of economic optimism dived to 43.8 from October's 47.3.

Comments