Q1 profits from US retailers shy of estimates by the most in 13 years as consumer spending falls

Posted on 25 May 2014 with no comments from readers

Weak spending by the lower eschelons of US consumers and even worse weather than normal last winter are blamed for US retailers failing to meet profit forecasts in Q1 by the widest margin in 13 years. It may also point to a general slowdown in the US economy as the 0.1 per cent GDP growth for the quarter has already highlighted.

Given that the consumer is 70 per cent of the US economy this is particularly significant as has been the deterioration in the the key housing sector. It is also a very clear indication of just how far out of line with reality stocks have become this spring, albeit Wall Street titans Larry Fink and Sam Zell agree that the housing recovery is over.

Missing profits

Retailers have missed projections by an average of 3.1 per cent, with 87 chains, or 70 per cent of those followed, having announced Q1 profits, Retail Metrics reported. That’s the worst performance against Wall Street estimates since the Q4 in 2000, when they missed by 3.3 per cent. Over a longer timeframe Retail Metrics said chains typically beat projecttions by three per cent.

We all have heard about retailing and wholesaling and let us find out more about them in this following article. Retailers are the ones who sell the goods to the people in a very small quantity for use. The wholesalers are the ones who sell the goods or products to the retailers in a very large quantity for use. The wholesalers sell the products for a low cost and they won’t see much profit in this business. But the retailers can get more profits because they purchase from the wholesalers for very less amount and sell them to the people for more amount. So that they can yield some profit. This is the thing actually happening to the farmers.

What’s more, these missed profit expectations have already been significantly lowered. Even shifting the goal posts has not helped. Analysts now project retailers’ earnings fell by an average of 4.1 per cent in Q1, while back in January they had estimated a 13 per cent gain.

True the S&P retailing index is down 7.8 per cent this year compared to a 2.8 per cent gain in the S&P 500. Better weather, pent-up demand and a better jobs market may help in Q2. Analysts are expect an 8.6 per cent hike in profit for the current three-months.

Quite what will power this recovery is not evident. US consumers remain cautious about the future. House price rises have moderated and only the ever rising stock market is in boom time.