It’s official: The past two months have brought the highest back-to-back jump in retail sales in nearly two years. In September, retail sales advanced 1.1%—topping analysts’ expectations of a 0.9% rise. On top of this, August’s retail sales were revised upward from 0.9% to 1.25%. As to be expected, the newest iPhone helped boost consumer electronics sales, which jumped 4.5%. Online retailers, like Amazon.com Inc. (AMZN), also posted a 1.8% jump in sales.
(While the major indices rose on this news, I must say that the results weren’t altogether that surprising—especially given the strong same-store sales numbers released by 17 retailers earlier this month.)
The retail sales report also revealed that Americans increased their spending for staples like food and gas. Tomorrow’s Consumer Price Index (CPI) report will shed more light on the inflationary pressures that may be getting kicked up by the Fed’s ultra-low interest rate policies.
But all in all, I considered this report to be quite strong. In fact, this news was good enough to prompt some firms to raise their third-quarter GDP forecasts. So I’m still largely comfortable with companies tied to the consumer, especially those that sell nondurable consumer goods. While many Americans may think twice before shelling out for big ticket items, we have been seeing sustained increases in spending at restaurants, grocery stores and discount stores.
And this week, we have several hot retailers (and some that have yet to find their stride) reporting earnings:
Mattel Inc. (MAT) reports third-quarter earnings before tomorrow’s open. The analyst community calls for 3.8% sales growth and 15.1% earnings growth. But over the past two quarters, expectations haven’t quite matched up with the actual results; Mattel posted a 33% surprise in the second quarter and a 14% earnings miss the prior quarter. MAT is a B-rated Buy.
Johnson & Johnson (JNJ) also releases its third-quarter operating results before open. This pharmaceutical and personal hygiene giant is headed towards 0.6% sales growth and just 0.8% earnings growth, while the rest of the industry’s profits are expected to advance 20.1%. JNJ is a C-rated Hold.
eBay Inc. (EBAY), the operator of the world’s largest online marketplace, is slated to announce third-quarter earnings after Wednesday’s close. Right now analysts expect 22% sales growth and 14.6% earnings growth—compared with the 18.6% industry average. EBAY is a B-rated Buy.
Thursday is a big day for the consumer electronics industry: Both Google Inc. (GOOG) and Microsoft Inc. (MSFT), two of the latest entrants into the tablet market, announce earnings after close. Between these companies, Google is clearly the analyst favorite as it’s headed towards 58.3% sales growth and 8.6% earnings growth. Meanwhile, Microsoft’s sales are expected to sag over 5% and its earnings by nearly 18%. GOOG is a B-rated Buy while MSFT is a C-rated Hold.
I’ll keep these earnings announcements (and plenty others), on my radar, and if anything turns out to be particularly newsworthy, you can find out about it first through this blog.