Lower Gas Prices Help Low-End Consumers, Retailers

Sep.19.06 | About: Target Corporation (TGT)

We mentioned last week that decreasing Oil prices would bode well for the consumer -- especially for the lower end consumer.

Not enough to start an entire new cycle, but a little relief that puts some jingle into their pocket.

Yesterday evening, Target tightened their September same store sales forecasts, previously a range of 3-5%; Now, the firm sees 5% same store sales gains:

Target Corp. (NYSE:TGT) said late Monday it now expects sales at stores open at least a year to rise around 5% in September, up from a previous forecast for a 3% to 5% rise.

The Minneapolis-based discount retailer's same-store sales rose 5.6% in September 2005. Target's same-store sales were up 2.8% in August; they'd risen 6.3% in the same month a year before.

Note, however, that the drop in Oil to the lows $60s translates as $10 or so a week to most familes. It is a welcome respite -- as will be lowered natural gas prices this winter-- but its not the beginning of the 1990s all over again.

Now this was a surprise, in light of the recent activity in fuel / energy prices:

Retailers Draw a Weak Forecast for Holidays

Retailers' sales gains during the holiday season will likely be weaker this year as consumers grapple with a stumbling housing market, according to a Washington-based trade group.

The National Retail Federation plans to announce today that it expects retail sales for November and December to increase 5% to $457.4 billion from the 2005 period. Last year, holiday sales increased 6.1%, according to the trade group, in line with its prediction for a 6% gain. Over the past decade, the industry has seen an average annual increase of 4.6%, the group said.

The forecast comes on the heels of weak back-to-school sales for many chains, which have stoked fears that a slowing housing market has begun to take its toll on middle- and upper-income U.S. consumers, who had kept spending despite soaring energy prices over the past year.

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