Making Use of Goodwill

Includes: SHLD, TGT, WMT
by: Geezeo

An oft overlooked indicator of consumer confidence and, thereby the overall state of the economy, involves low-cost consignment retailers. The more people frequent and spend at stores like Goodwill or The Salvation Army, the less they are shopping at mainstream chains and malls. As was summarized Tuesday by Reuters' "Drop in retail sales weighs on stocks", recent indicators of stabilization may have been mistaken or have not traveled down to the average consumer, especially if they are worried about becoming unemployed.

MSSI figures through March-09 illustrate that the average Geezeo shopper visiting stores operated by Goodwill Industries has both increased his or her monthly spending and increased the amount of trips in the month. Looking at data for the last twelve months reveals a more than 28% increase in frequency as well as a year on year jump of 36% in spending. Observing these trends from the beginning of the year indicates that this spending increase is continuing, with Geezeo users increasing monthly spending by almost 25% overall since December. This can be attributed to the increased customer traffic to Goodwill locations prompted by higher unemployment and a relatively bleak outlook for the short term.

This being the case, however, it is also important to note that this higher volume of customer has increased its average outlay per trip by 8.5% compared to March a year ago. Interestingly, the increased frequency of customers to another discount retailer, Sears (NASDAQ: SHLD) subsidiary Kmart, has not led to increased revenues. In fact the opposite has been observed. Kmart's first quarter saw three straight months of spending declines, which total more than a 37% average spending decrease from December's holiday figures. Year on year statistics are not as drastic, showing an only 10.77% decrease at the retailer.

The fact that these two discount retailers' first quarter results are so divergent sheds light on the current situation facing the sector at large. Consumers are still keeping an eye on their discretionary spending, which means that until unemployment fears have largely disappeared, retailers will be continue to see varied revenues. This data was compiled by the Geezeo Main Street Spending Index (MSSI).

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