* Consumers wary of lingering weakness in housing market
* Filling the caverns of empty office cubicles
By Ros Krasny
BOSTON, May 26 Many U.S. consumer goods
companies still face a tough operating environment as shaky
consumer confidence and lingering high unemployment keep
discretionary spending soft.
Companies from big box retailers to nutritional supplement
makers presenting at a Janney Capital Markets consumer
conference in Boston on Wednesday forecast better times ahead
after a brutal 2008 and 2009.
But most are keeping a reign on expansion and looking for
ways to boost margins with supply chain improvements,
e-commerce and, in some cases, squeezing out costs from
Many workers were jobless for longer than in previous
recessions; others took part-time jobs when they would have
preferred full-time employment, government figures show. The
results could have a lasting impact on their spending
David Flanery, chief financial officer with pizza chain
Papa John's International Inc (PZZA.O), said consumers remain
somewhat in a funk, even with the economy turning up.
"We're in the middle of a jobless recovery, and
unemployment is a leading indicator for the health of
restaurant companies," he said. "Restaurants are the ultimate
discretionary spending category."
The U.S. economy, as measured by gross domestic product,
has grown for the past three quarters after shrinking in five
of the previous six quarters.
Unemployment was 9.9 percent in April, not far below its
Consumers remain wary, said Larry Stone, president and
chief operating officer at the home improvement chain Lowe's
Companies Inc (LOW.N).
With about a year's worth of housing inventory overhanging
the market and millions of mortgages under water, "I think
that's got the consumer kind of edgy, and that gives us a
little bit of concern," Stone said.
As a result, 2010 will likely be a "transition year" of
uneven recovery in selected parts of the economy, with more
broad-based improvement likely in 2011, he added.
Still, Stone said 21 of Lowe's 23 regions in the United
States had positive year-on-year sales comparisons in the first
quarter, including two with double-digit positives.
"It's been a while since we've said that. We've said
double-digit negative a lot of times," he said.
At the conference focused on "the new normal" for consumer
firms, Joseph Doody, president of North American delivery for
office supply store Staples Inc (SPLS.O), said buyers are
clearly more selective now, whether making purchases for
themselves or for their businesses.
"People are buying the specials, but not adding as much to
their overall baskets," he said. "And they are clearly buying a
little bit less in some discretionary categories."
To counter a tendency for buyers to shop around, Staples
has attempted to boost loyalty by signing up big customers for
reward programs featuring cash back and other incentives.
Sales at chains such as Staples and rival OfficeMax Inc
OMX.N are correlated closely with white collar employment --
the millions of workers sitting in office cubicles.
Huge layoffs during the recession mean that as the recovery
moves ahead, office furniture sales could lag those of other
business segments, said Doody.
"It depends how many empty offices there are to fill in
before they run out of space," he said.
(Reporting by Ros Krasny, editing by Leslie Gevirtz)