All Hail the Amazing American Consumer!

The American consumer seems to have a split personality, buying luxury with aplomb while pinching every penny. Or so it seems ...

Last quarter, I reported on a strange and somewhat disturbing trend. Sales were up at both deep discounter Dollar Tree (Nasdaq: DLTR  ) and luxury retailer Williams-Sonoma (NYSE: WSM  ) , suggesting that the rich were getting richer, and the poor were getting thriftier. That trend seems to have continued, as both companies reported excellent third-quarter results Thursday.

Revenue at Williams-Sonoma rose 11.8%, while same-store sales increased by 8.1%. Gross margin climbed strongly from 34.7% to 38.2%, suggesting that the retailer was able to exert pricing power. On the other end of the retail spectrum, Dollar Tree reported very similar results, with revenue up 14.2% and same-store sales up 8.7%.

The situation isn't isolated to Dollar Tree and Williams-Sonoma, either. Wal-Mart (NYSE: WMT  ) , a short step above Dollar Tree in terms of pricing, had a 1.3% decline in same-store sales at its U.S. Wal-Mart stores, as value-oriented customers sought ever cheaper products. Meanwhile, high-end retailer Saks (NYSE: SKS  ) increased revenue by 4.3%, with the help of a 5.7% jump in same-store sales and a 230-basis-point expansion in gross margin.

Interestingly, Wal-Mart reported a 9.3% leap in its international sales, which the company noted primarily came from China, Japan, Mexico, and Brazil. The implication here is that the U.S. is in dire straits right now (not totally new information), but that other countries, especially in emerging markets, might be faring better.

As for domestic investing, though, any retailers in the middle of the economic spectrum will have some trouble. Companies able to sell profitably at very rock-bottom prices will see market-share gains as more families fall on hard times. But so will companies that cater to wealthier customers who've been largely unfazed by the crisis.

Fool contributor Jacob Roche still shops at Williams-Sonoma, but only with the help of a gift card he's been hanging onto for two years. He holds no position in any of the stocks mentioned. Wal-Mart is a Motley Fool Inside Value recommendation. Wal-Mart is a Motley Fool Global Gains pick. The Fool owns shares of Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 20, 2010, at 11:36 AM, madmilker wrote:

    Maybe Lance Winslow was right in what he wrote in that article...

    "The Flow of Trade in a Global Economy" about Wal*Mart.

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