SOURCE: Rothman Research

Rothman Research

June 22, 2010 08:31 ET

Slow but Steady Recovery in the Specialty Retail Sector

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 22, 2010) - www.rothmanresearch.com -- The retail industry takes most of its mana from consumer confidence which according to the Conference Board Consumer Confidence Index surged for the third consecutive month in May. The increase of 65.9 for May 2010 is the highest level the index has recorded since March 2008. Additionally, retail sales were up 7.4% year-over-year, but as compared to the previous month sales in the retail space declined by 1.2%. Looking closely at those sales figures for May, it becomes perceptible that consumers lost a bit of their appetite for shopping in the month of May. A few factors that still keep consumers and retailers edgy are the painstaking recovery in the U.S. jobs market and income growth. 

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There a few segments in retail industry that despite being consumer discretionaries have been enjoying a little more of current consumer spending. One of these segments which is outperforming the whole retail industry is the Pet Products retailers which have been doing fairly well during the recession and are continuing on this trend now that the economy is slowly healing. Petsmart Inc. (NASDAQ: PETM) provided upbeat first quarter earnings at the end of May with a surge of 24% year-over-year in its EPS. This result has been attributed to better-than-expected comps growth of 2.8% for the first quarter and an improved gross margin. "We see Petsmart as a defensive play in the retail industry. It has been performing impressively well notwithstanding economic uncertainties and a slow recovery. The company is currently more profit orientated and is going to minimize store openings throughout the remaining of 2010. Another specialty retail player that has been delivering on its earnings is Sally Beauty Holdings Inc. (NYSE: SBH). The company, a specialty retailer of professional beauty supplies, has seen its latest quarterly earnings for 2010 increase by 40% due to a 12.3% surge in sales as compared to last year," commented Jack Benassi of www.rothmanresearch.com

*Free downloadable research reports on Petsmart Inc. and Sally Beauty Holdings Inc. are available by signing up now at http://www.rothmanresearch.com/article/petm/23607/Jun-22-2010.html or http://www.rothmanresearch.com/article/sbh/23606/Jun-22-2010.html

Whilst consumer confidence still seems to be treading bullish territories, retailers continue to keep a cautious stance regarding outlook for the rest of 2010. An improving employment level could be the catalyst to a strong recovery in the retail space. With the next report from the Conference Board Consumer Confidence Index due at the end of June, analysts are expecting better comp readings from retailers boosted by Memorial Day, Father's Day and graduation gift sales.

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