Rising Consumer Sentiment Is Good news For Retailers Like Wal-Mart

There has been a steady stream of encouragingly better news on the economic front from the U.S.A.

Rising Consumer Sentiment Is Good news For Retailers Like Wal-Mart

Retail sales were up 0.8 percent for the month of July, representing the biggest increase since the month of February, and the first positive number in four months. In July, payrolls rose by 163,000, the highest in five months. The index of leading economic indicators rose much better than expected in July – it rose 0.4 percent against a forecast of 0.2 percent.

Today, the Thomson Reuters/University of Michigan preliminary August index of consumer sentiment rose to 73.6 from 72.3 in the previous month. This was the highest level seen since May, and beat estimates of 72.2. It is significant that the growth has come after two consecutive negative months.

What is heartening is that this indicates the sustainability of the other figures, such as retail sales growth and better payrolls. This is also a sign that consumer spending could at least maintain current trends, which however, are still quite low.

The economic significance of stronger consumer sentiment is that shoppers could make more trips to retail stores and malls. These numbers, therefore, are good news for the retail sector, which has already been seeing better earnings and growth.

Retailer, Wal-Mart Stores, Inc. (NYSE:WMT), reported an increase of 5.7 percent in net income for the second-quarter. Net income for the discounter stood at $4.02 billion, or $1.19 per share, for the quarter ending July 31, against $3.80 billion, or $1.09 per share, a year ago. Revenues for the period, excluding membership fees at Sam’s Club, rose 4.5 percent to $113.53 billion, but were below analyst estimates of $114.63 billion. Wal-Mart Stores, Inc. (NYSE:WMT) raised its full year profit outlook on expectations of increased consumer spending.

Target Corporation (NYSE:TGT)’s second quarter earnings beat expectations. With profits at $704 million on a year-over-year basis, the retailer recorded an increase in earnings per share from $1.03 last year, to the current $1.06.

Dollar Tree, Inc. (NASDAQ:DLTR), a discount retailer, announced earnings of $119.2 million, or $0.51 per share, for the most recent quarter ending on July 28th, 2012. This was a big improvement from last year’s $94.9 million, or $0.39 per share, and exceeded analysts’ expectations of $0.47 per share.