The earliest signals that holiday spending is on the rise usually comes from signs in the intermodal transportation trends, which includes tracking goods shipped using more than one form of transportation, usually rail cars and trucks. This year, the signs indicate a modest gain over last year’s conservative consumer spending, but anticipating continued consumer wariness of the current economic situation retailers have lowered earnings expectations.
The world’s largest supplier of clothes and toys, Li & Fung Ltd. based in Hong Kong, supplies retailers such as Wal-Mart Stores Inc, Target Corporation, and Kohl’s Corp. According to Li & Fung, these companies are ordering slightly more than last year, but still don’t expect consumers to let go of much money this holiday season as the economic growth is still sluggish. Most of these companies, as well as Macy’s Inc, have lowered their earnings expectations, hoping for at least a three to 3.5 percent gain over last year’s sales once figures are adjusted for inflation.
The net income of Li & Fung is down 16 percent to just $96 million for the six month period ending on June 30, compared to the same time period last year. Wal-Mart Stores Inc has lowered their earnings forecast from $5.10 to $5.30 per share, down from their previous forecast of $5.20 to $5.40 per share, due to the slow pace of the economic recovery.
Retail sales (those excluding figures for restaurants, vehicles, and fuel) could climb 3 to 3.5 percent during November and December due to holiday sales, which is an improvement over last year’s mere 2.5 percent increase. According to Robert Dye, chief economist for the Dallas, Texas-based Commercia Inc, the tension felt by retailers and the transportation industry depending on these sales extends beyond the holiday season into next year.
Total intermodal transportation volume is up four percent for the four-week period ending on August 10 from the same period last year, according to the Association of American Railroads based in Washington. Consumer goods account for about 72 percent of this freight, including electronics and clothing bought for holiday gifts.