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Are U.S. shoppers over frugality?

Bob Moon May 20, 2010

Are U.S. shoppers over frugality?

Bob Moon May 20, 2010


Tess Vigeland: “Cautiously optimistic” is, admittedly, an overused phrase. But still more retailers used it today to explain their decision to raise their outlook on sales. That’s especially true for luxury stores reporting a sizable jump in profits during the first quarter. They’re hopeful it shows American consumers are more willing to buy — not just what they need, but what they want.

Our senior business correspondent Bob Moon takes a look at how significant this uptick might be.

Bob Moon: The upscale housewares chain Williams-Sonoma just added its positive results for first three months of the year. Sharon McCollum is the company’s chief operating officer, and you could almost hear her breathing a sigh of relief during a conference call with analysts today.

Sharon McCollum: This is the quarter where the consumer’s confidence started building.

There’s no question it’s a good sign when high-end consumers are loosening their grip on more disposable income. But at the Wharton School of Business, marketing professor Stephen Hoch says it doesn’t necessarily mean Americans are abandoning their new frugality.

Stephen Hoch: The high-end was where the real carnage took place, so it’s sort of to be expected that looking good relative to a bad past is easier to do than if you’d been doing better.

Judging by many retailers’ top lines, though, even middle-class consumers are beginning to spend a bit more. Williams-Sonoma President Laura Albers explained her strategy to analysts today. She aims to offer “compelling” products customers are prepared to spend a few extra dollars for.

Laura Albers: You know, you see some stores that are really busy and you see some that are ghost towns, and I think it’s all dependent on how assertive the management has been in addressing the changing needs of the consumer.

Target says it’s been trying to stay ahead of that curve, and it’s seeing some results. Kathy Tesija is the chain’s marketing chief.

Kathy Tesija: I would say that it’s more about guests feeling a little bit more comfortable putting an extra discretionary item in their basket. So we’re seeing those mixed trips, where they’re buying needs and wants, starting to increase.

Still, Wharton’s Stephen Hoch suggests that may be as good as it gets for a while.

Hoch: It’s going to be a more measured consumer — even the high-end consumer — I think as we go forward, because habits that change and then change back take time.

He says the challenge for retailers is anticipating what consumers will do next.

I’m Bob Moon for Marketplace.

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