Some aspects of the quarterly financial reporting season now underway are coming in about as one might expect. The foreign arms of US multinationals are doing better than their domestic counterparts. Firms whose main customers are businesses are reporting higher earnings gains–and eliciting a more favorable response from Wall Street–than those that cater to the consumer.
Of all the corporate announcements this week, three jump out at me, though. They are:
–Citigroup announced yesterday the results of one of its periodic surveys of the consumer, based on telephone conversations with 2,005 individuals last month. The real attention-grabber is the conclusion that almost two-thirds of Americans don’t believe the economy has “hit bottom” yet. Most think it will take several years for things to return to normal for them.
Normally, ordinary people are much savvier than Wall Street gives them credit for. And survey participants’ ideas of when the country is back to normal coincides closely with that the Fed thinks. But it’s hard to figure what to make out of the “hit bottom” idea, since the domestic economy did hit bottom about a year ago and has been bouncing back since. Maybe it’s just a poorly phrased question. Maybe it means that most people don’t have clear evidence that their family fortunes have turned up yet (as opposed to the idea the headline portrays that things are continuing to get worse). Maybe it’s not a comment about the families’ individual situation but about the country as a whole and the size of the government deficit.
In any event, it suggests that a US consumer spending boom isn’t right around the corner. Le’s hope C goes for less shock value and more information the next time it asks the questions.
–On July 19th, three days before announcing (disappointing) June quarter financial results, AMZN issued a press release about its sales of e-books on Kindle. Over the past three months, AMZN’s overall unit sales of e-books have been 43% higher than its sales of hardcovers; in the past month, e-book unit sales have been 80% higher than those of hardcovers. In addition, the (unspecified) growth rate of Kindle e-readers has tripled since AMZN cut the price from $259 to $189.
The timing of the announcement says AMZN wanted to make sure this information made a separate impact on investors/consumers and didn’t get lost in the welter of data contained in an earnings release.
I don’t think this development can be good for AMZN’s near-term profits from books–not that AMZN’s management it too worried about that. What’s interesting is that e-books now appear to comprise well over 10% of total book sales in the US–and accelerating. Only AMZN knows for sure what its market share in e-books is, but the Kindle press release makes it sound like AMZN is getting three-fourths of the business.
–The most interesting announcement, to me anyway, is that made by the New York Times Company in its quarterly earnings announcement yesterday. NYT’s online advertising revenues, which grew by 21% year over year, were enough to offset a 6% decline in print advertising sales, leaving overall ad revenues flat. I don’t know NYT well as a company and I’m not sure this does much for the stock. But I wouldn’t have guessed that the newspaper company’s painful transition into a new world was this far along.