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National consumer survey points to tough holiday sledding
for retailers, says RBC Capital MarketsBaby boomers overwhelmingly most pessimistic group about the economy
NEW YORK, September 19, 2007 — A national survey
of consumer spending habits indicates that a plunge in consumer
confidence may mean tough sledding ahead for retail companies
as the peak holiday spending season approaches. The sharp
drop in consumer sentiment is reflected in a retail and restaurant
sector survey being released in conjunction with the RBC Capital
Markets Annual Consumer Conference, being held this week in
Naples, Florida.
The survey findings across four retail sectors - hardlines,
softlines, restaurants, and leisure products - correlate with
the latest RBC CASH (Consumer Attitudes and Spending by Household)
Index, a monthly nationwide sample of 1,000 U.S. households.
Consumer confidence declined significantly this month as the
CASH Index dropped to 71.1 in September from 89.3 in August,
with Baby Boomers the least optimistic group across all four
indices - current conditions, expectations, investment, and
jobs.
"The RBC CASH Index is an excellent macro-economic barometer
of retail sales and spending trends, and all signs from that
and our more micro-oriented retail sector survey point to
a slowdown in consumer spending that could affect the coming
holiday season," said RBC Capital Markets equity analyst
Larry Miller. "Particularly with Boomers, traditional
drivers of economic growth, being so pessimistic about the
immediate economic future. However, while the survey results
do not point to a strong holiday season, they also do not
suggest an impending disaster, and there are a few bright
spots."
For example, according to the RBC Capital Markets Consumer
Conference survey, despite the sour mood, four in five women
surveyed (82 per cent) said that they have shopped for (and
purchased) either a similar amount or more clothing in mall-based
apparel stores this year than they did last year. Nearly six
in 10 regular women shoppers plan to spend more or the same
on apparel during this holiday season as compared to last
year, and almost half of the women who did not shop last season
plan to shop this year. The results provide some encouragement
for apparel retailers, including department and specialty
stores, looking ahead to the holiday season.
Overall, delay is a common theme for consumers. Nearly 80
per cent of consumers plan to purchase a recreational vehicle
in the future, including motor homes, boats, motorcycles and
all-terrain vehicles. However, pent-up demand for these big-ticket
items is unlikely to be satisfied in the near future, as the
majority of consumers say that it will be more than a few
years until they make such a purchase.
Near-term purchase intentions in consumer electronics are
also relatively weak. Just seven per cent of respondents indicated
that they intend to make their next significant consumer electronic
purchase ($500 and up) in the next three months. More than
half of consumers (51 per cent) plan to hold off more than
a year in making their next purchase of a consumer electronics
item over $500.
Consumer electronics specialty stores such as Best Buy, Circuit
City and Radio Shack are the destination of choice for those
with the highest propensity to purchase new products such
as a flat-screen TV, MP3 player or video game system, with
45 per cent visiting these stores and another 11 per cent
visiting their Web sites. Mass channel retailers such as Wal-Mart
and Costco were the first choice of only 28 per cent of prospective
buyers, showing the strong hold that specialty retailers continue
to have on consumers -- specifically on desirable higher-income
consumers.
The restaurant industry, a key indicator of present and future
discretionary consumer spending, is experiencing a continuation
of the rough patch it has faced in recent months. Four in
10 consumers (39 per cent) say they are eating out at restaurants
less often than they did six months ago. Of those who continued
to eat in restaurants, 40 per cent say they are less willing
to order higher-priced entrées, appetizers and desserts.
Also troublesome for the industry is that a majority of Americans
(54 per cent) say they plan to eat out less frequently in
the coming months.
"After a summer of worrisome economic news, consumers
are increasingly concerned about their prospects, and this
is affecting their willingness to make major purchases,"
said Marc Harris, RBC Capital Markets' Director of U.S. Equity
Research. "While the signs are pointing negative, there
are some bright spots in retailing, and a spate of good news
this fall could raise shoppers' spirits in time for the holiday
season."
The RBC Capital Markets consumer survey is based on a representative
nationwide sample of 1,001 U.S. adults polled by survey-based
research company Ipsos Public Affairs. The margin of error
was plus or minus 3.1 per cent.
About RBC Capital Markets
RBC Capital Markets is the corporate and investment banking
arm of RBC and is active globally in debt origination, sales
and trading, foreign exchange, infrastructure finance, structured
products, metals and mining, and energy. Its North American
platform includes leading equity, underwriting, sales, trading
and research businesses and a significant U.S. middle market
investment banking franchise. Bloomberg ranks the firm as
one of the Top 20 investment banks globally.
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Contact:
Kevin Foster, RBC Capital Markets, (212) 428-6902, kevin.foster@rbccm.com
Loretta Healy, The Hubbell Group, Inc. (781) 878-8882, lhealy@hubbellgroup.com
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