Chin Up in the Downswing


Chin Up in the Downswing: U.S. Consumer Spending Up, Best Buy Spurs Investor Confidence, Buffalo Wild Wings Suggests Casual Restaurants’ Resiliency

March 27, 2009 06:15 PM
by Anne Szustek
Positive indicators that wrap up the week: American consumers slightly increased their spending in February and market observers see potential in Best Buy and Buffalo Wild Wings.

Consumer Spending Continues Slow Recovery in February

Last month was the second month in a row of growth in U.S. consumer spending, according to a government report released Friday. During February, Americans increased their spending by 0.2 percent, on the heels of a 1 percent increase in spending in January. “Since consumer spending makes up 70 percent of the economy, some of the dire forecasts for economic growth in the first quarter may not be true,” chief economist John Ryding of RDQ Economics told the International Herald Tribune. Rates of personal savings have also been up the past couple of months: “In February, Americans saved 4.2 percent of their after-tax income, compared with 4.4 percent in January,” the IHT reports.

Best Buy Spurs More Market Buys

Despite Minneapolis-based technology and appliances retailer Best Buy reporting a 28 percent loss in fiscal income for the fourth quarter of 2008, it was still better than what market analysts expected. The company’s Q4 earnings per share were $1.61, which surpassed the average analyst projection of $1.40. “Furthermore, the company expects earnings of $2.50 to $2.90 a share in the next fiscal year, ahead of the analyst consensus for $2.47 a share,” The Wall Street Journal’s MarketBeat blog reports. Taking Best Buy’s results as a bellwether of a more robust retail climate, investors showed renewed confidence in the financial markets Thursday, helping to give the S&P 500 a morning boost. “That’s when the market took off—[S&P] futures went from 814 to 822,” Dave Rovelli, managing director in trading at Canaccord Adams, told the MarketBeat blog. “When they think the consumer is completely dead, and Best Buy blows out earnings, even if a lot of it is lowered prices on things, the consumer is obviously not dead.”

Buffalo Wild Wings Delivers a Kick

BloggingStock talked with two key market observers who regard Buffalo Wild Wings stock (BWLD) with favor. Richard Schmidt, editor of The Stellar Stock Alert, outlined some bullish statistics for the casual dining chain: 28 percent growth in earnings; a 32.6 percent increase in revenue and same-store sales growth of 4.2 percent during fourth-quarter 2008. Buffalo Wild Wings “is up over 100% from its November low,” Schmidt said. “Most restaurant stocks aren't doing very well. So it’s significant that BWLD is bucking the trend. It shows real strength and growing customer demand.”

Joseph Hargett, an analyst with Schaeffer Investment Research, concurred: “BWLD has plenty of momentum on its side.”

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