By Kevin Grewal, Editorial Director at SmartStops.net
As back to school shopping is in full swing and consumers are loosening their grip around their wallets, has the retail sector been healed or are tough times still to come?
Several economists have openly stated that the recession is ending and the economy is recovering. Unemployment numbers are starting to ease, there are signs that the housing markets are turning around, and GDP, of which consumer spending constitutes a major chunk, is on the mend.
To add to these macroeconomic avenues, it appears that shoppers are ready to spend. Apple (NASDAQ:AAPL) continues to sell loads of its sleek iPhones, the auto industry it seeing a jump in car sales, driven primarily by the federal government’s “cash for clunkers” program which is so popular that it ran out of funds, and Facebook managed to sell $42 million in virtual gifts for users to send to friends.
One thing that these consumers who are spending have in common is they are penny pinching and trying to find a good deal. This is further evident in the uptrend in discount on-line travel broker Expedia (NASDAQ:EXPE), whose value has more than doubled from a March low of $6.39 to close at $22.77 on August 10, and retailer JC Penney (NYSE:JCP), which has gained 134% since a March close of $14.18 to close at $33.21 on August 10.
So does this mean that the sector is in the clear, only time will answer this question. After all, according to tracking firm comScore, online sales, which many consider to be a cheaper method of shopping than actually visiting stores, excluding automobiles, auctions and corporate purchases declined 1% in the second quarter of 2009 when compared with last year.
Despite this report, on-line giant e-Bay (NASDAQ:EBAY) has more than doubled from its low of $10.27 in March to close at $22.49 on August 10 and Amazon (NASDAQ:AMZN) has gained 74% after witnessing a January low of $48.44 to close at 84.44 on August 10.It is safe to say that the sector is an upward tren; however, when investing in these previously mentioned equities, one must keep in mind the risks involved and include an exit strategy which will help preserve returns and mitigate these risks.