Retailers, like most in the auto industry, have anticipated further recovery in industry sales for the remainder of 2010. But the analysts at Standard & Poor's Rating Services are reminding us that things are still fragile out there.
Sales and profits for the public retailers rose during the first half, and their business model has proved “sufficiently resilient” during the recovery, S&P analyst Nancy Messer wrote in a report released yesterday. But Messer also classifies most of the publics as having a “weak” risk assessment. AutoNation Inc., deemed to have a “fair” risk assessment, is an exception.
The concern: What if unemployment remains high and consumer confidence dips further? We saw the latter in action on Tuesday, when the Conference Board released the lowest consumer confidence numbers since February. Messer worries such trends could cause consumers to postpone car purchases and nonessential maintenance. And that will hurt retailers.
Another risk — and we continue to hear about this one from dealers and industry watchers: Credit availability remains limited for consumers with subpar credit scores.
September sales numbers will be released Friday. Analysts and some big retail groups are expecting significant gains over last year's results, which were dragged down by a post-clunkers hangover. Let's hope the improvement continues.