Things Looking Up for Consumers

Glaser: Another data point we got today were September retail same-store sales. What are your thoughts about those?

Johnson: Just to be careful, these are what the individual stores report in terms of what's happened. Now, next week we'll get the official government retail sales report, which is total sales numbers, and not same-store sales.

So, it's a little bit different series, and that has autos. This is mainly stores with a fairer weight to some of the apparel side of the house.

But, we had some very, very good numbers today. One that jumped is Aeropostale, a youth clothing shop, was up 18 percent year over year. You had Kohl's up 5.5 percent; it's kind of a bulwark of middle America shopping, doing very, very well.

Even some of the bigger department stores, Macy's was still down 2.2 percent or something like that. That's half what expectations were, so that number looked better.

Even somebody like Abercrombie, who's been down 33, 34 percent month after month because they won't cut prices, was actually only down 18 percent this month.

Glaser: What do you think is driving this relative outperformance?

Johnson: Sure. There's a few things happening here. One is the weather has been working so far against us every month. Summer was cool in much of the shopping areas, and that really depressed clothing and apparel sales.

Now, we've had a relatively cool fall, and I think it's really boosted apparel sales. So, I think that's helped considerably.

In the numbers, the way Labor Day fell put a slight advantage on this year versus last year, so that helped. I think partly that consumers weren't spending on Cash for Clunkers or shopping for a car, so this month it was back to basics a little bit again.

I'd say those were a few of the themes, and I think regionally maybe the West had been so awful that maybe it wasn't as awful, and maybe that helped the numbers a little bit too.

Glaser: It makes that a little bit easier. Now, Alcoa reported earnings after the market yesterday, and I think it surprised people on the upside.

Johnson: Yes.

Glaser: Was that surprising to you?

Johnson: Well, the fact that it happened is a good thing, and they actually had a little bit better unit volumes, but again, it was a lot of cost-cutting and cost-savings types of things that helped the numbers. It actually boosted them to report a profit instead of a loss.

I guess one of the things we always have to keep in mind--we've had such a bad number in the jobs area for so many months--the upside of that number is, as corporations hold up sales relatively well, that profit margins improved more than people expect.

I don't think that's sustainable forever. I think they're going to have to hire more people back, and that will help the employment situation. But right now, the benefits of all this productivity are flowing to corporations, and the Alcoa number just shows that trend front and center again.

Glaser: Looking across all of the metrics--we have seen some, like the jobs number, like the ISM index, taking a little bit of a step backwards--do you still think that we're on track for a reasonably robust recovery?

Johnson: I still believe we are. I don't think I'm as robust as I was say maybe a month ago in terms of my thinking, but if a poor recovery is 2.5 percent GDP growth and a really good recovery is 7, I think we will fall somewhere in the middle of that range.

That's true still. Whether the nuance is a half a percent less than what I was thinking before or not is really not relevant. I think we're going to have a decent recovery, and I think we're starting to see some of that right now.

Glaser: Well, time will tell.

Johnson: OK.

Glaser: All right. Thanks for speaking with me, Bob.

Johnson: Good to be here.

Glaser: For Morningstar.com, I'm Jeremy Glaser.