Don't Believe Retail Sales—The Consumer Isn't Back
An upbeat retail sales report for August may have buoyed up some hopes for renewed consumer spending, but those on the frontlines — consumer products and retail executives — interviewed by CNBC on Wednesday weren't quite as upbeat.
"I would say that one month does not make a trend and that we have to be very careful about reaching conclusions that the consumer is back because of August data," said Home Depot Chief Financial Officer Carol Tome.
Tome said she thinks there's a lot of noise in the August numbers, which reflect back-to-school spending driven by deep discounts at some retailers, as well as the government's popular "Cash for Clunkers" auto program.
Not only has Home Depot's business been hurt by the recession, but the slowdown in the housing sector has dampened sales considerably.
Still, Tome said, "Our business is less bad than it's been." (To hear more from Tome, click here to watch this portion of the interview.)
In a separate interview, H.J. Heinz Chairman and CEO William Johnson said, "Consumers have changed their purchase habits. We've seen significant migration from consumers to other channels, to private label, to more value, but we are also seeing more in-home consumption."
However, Johnson said the shift to private label, which are brands sold under a store's brand, is "moderating."
This trend has put significant pressure on the sales of brand name products in recent months, and reinforces why companies need to continue to invest in product development.
Martha Stewart, who was also interviewed Wednesday, suggested the consumer would come back eventually.
"Yes, the consumer is going to come back," Stewart said. "It takes a while because they’ve learned what they can live without, right, and now they are going to start coming back. People like to buy things. People like to find new things. It’s our job to find the things they will respond to."
Martha Stewart Omnimedia and Home Depot are hoping that what consumers want will be a new line of home-improvement products.
These items, which will include everything from closet organization systems to patio furniture, will go on sales at Home Depot stores in the U.S. in January, and will broaden Stewart's brand beyond her existing deals with Macy's and Sears Holdings' Kmart stores.
- Interview: Anheuser-Busch InBev CEO Carlos Brito on the Return to the NYSE
Stewart's deal with Kmart is set to expire in January. During her appearance Stewart was very critical of the way the discount retailer managed the Stewart brand.
"In the last couple of years, the new ownership has let our line deteriorate," she said.
More from Consumer Nation:
- Has Sponsoring Fashion Week Lost Its Style?
- Toys 'R Us Plans to Open 350 'Holiday Express' Stores
- Risky Business: Lingerie Makers Go Outside Their Comfort Zone
Questions? Comments? Email us at firstname.lastname@example.org