Five Signs of Recovery on the Corporate Front

Jason Stipp: Jason Stipp from Morningstar, and welcome to the Friday Five. A lot of economic indicators are showing the recovery is strong, but we're starting to see some signs on the corporate front.

Here with me to share five of those is Morningstar markets editor, Jeremy Glaser. Jeremy, thanks for joining me.

Jeremy Glaser: You're welcome, Jason.

Stipp: What do you have for the recovery signs Friday Five?

Glaser: Consumers are back eating at restaurants. They continue to want iPods and, surprisingly, Coach bags again. The travel industry is starting to get a little bit better. Finally, I'll take a look at one of the hardest-hit industries during the recession and a bright spot there.

Stipp: Well, I just had lunch, so there's no place better to start than food.

Glaser: A lot of people worry because during the recession people weren't working as much. The unemployment rate is still very high, but people weren't eating out. You're either bringing lunch from home, or if you're out on the road, you're not going to have breakfast at McDonald's.

We're starting to see that turn around in a really serious way. McDonald's sales are doing really well, but people are also going into higher-end places like Starbucks, and Panera posted really good results this quarter.

People are willing to spend a little bit more for something to indulge themselves a little bit. It's a nice turnaround from what we've seen in the past.

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Stipp: Certainly consumers are starting to feel a little bit better. They might also be spending some of that money on technology. Apple results looked pretty good.

Glaser: Yes, it's hard to say that Apple ever had a lull during the recession. They have done pretty well throughout all of this. But, the demand for iPhones continues to just astonish us, that even with no new hardware, not a lot of new markets open to the iPhone, people are still rushing to the handset. When their contracts expire with other carriers, they're jumping into it. They're excited about it. The ecosystem continues to build. This could be a big driver for Apple in the future.

With the iPad sales starting to come out as well, we'll see what those really look like next quarter. Another big quarter for them, and it shows that if there's a product that people want, they're going out there and spending the money for it.

Stipp: And the fact that more people might be able to buy them in the future certainly bodes well for them.

Coach also reported this week, and they say that they're seeing some inflection points on the purse front. What did you hear from them?

Glaser: They certainly are seeing things get better. Traffic to Coach stores never dropped completely off a cliff. People were still going in there, looking at the purses, but no one was buying. This quarter they finally saw that conversion rate go up, so they're seeing people not only looking, but actually buying it.

Some of this is they're trying to have better-priced products. They're moving from a lot of only high-end handbags to stuff that's a little bit on the lower end.

But, it also shows people's willingness to splurge on an approachable luxury item, like a Coach bag. That's a good sign for spending on luxury items and also probably on some mid-market stuff as well.

Stipp: Always great to see that discretionary spending continue to tick up a little bit. On the hotel front, are hotels doing better? Are people finally getting out there on the road?

Glaser: A little bit. We discussed a couple weeks ago with the earnings that we're looking forward to, and Marriott was one of them because we wanted to see are people out there? What kind of people are traveling?

They certainly are seeing an improvement in demand. They think rates are going to start to go up again. They think occupancy is going to be doing a lot better. So, I think we'll see people traveling.

Does that mean the hotel business is out of the woods yet? No, there are still some issues with financing, and we're still nowhere near where the peak is. But, people are much more willing to take leisure trips. Business travel is picking up again--another good sign for the economy.

Stipp: How was the hotel stays in Europe? Those ticked up a little bit, didn't they, recently?

Glaser: Yes. For some reason the last couple of weeks it seems like a lot of people just didn't want to leave Europe. I know it's a great place, but I have no idea why those rooms were doing so much better.

Stipp: I can't imagine why that would be.

Finally, Jeremy, for number five, one of the hardest-hit industries has been the spring-form pan business. Even with all the bailouts and the government money thrown at this poor, ailing industry, I can only hope that there's some good news for number five.

Glaser: Certainly this has been one of the hardest-hit industries throughout the entire downturn, but thankfully there's some light at the end of the tunnel now that Martha Stewart has received a $3 million retention bonus to stay at Martha Stewart Omnimedia, as was reported by Michelle Leder at Footnoted.

I guess Martha Stewart was thinking of leaving to go to some other Martha Stewart-themed company, so they had to pay her plenty of money. But I'm glad that she'll probably put this back into the spring-form pan industry so that she can make all of her delicious cakes, and we shouldn't have to worry too much about another government bailout to keep those jobs.

Stipp: It sounds a little half-baked to me, Jeremy.

Glaser: Yes, it will take a while to see if it's "a good thing."

Stipp: OK. Thanks for joining us.

Glaser: You're welcome.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.