Consumer Confidence Jumps

Highlights include Select Comfort Corp. (SCSS - Snapshot Report), Retail Ventures, Inc. (RVI - Snapshot Report), Cost Plus, Inc. (CPWM - Analyst Report), Wal-Mart Stores, Inc. (WMT - Snapshot Report) and Target Corp. (TGT - Snapshot Report).

Low-priced retail stocks are jumping again today. Names moving higher include Select Comfort (SCSS - Snapshot Report) up 20%, Retail Ventures (RVI - Snapshot Report) up 20% and Cost Plus (CPWM - Analyst Report) up 10%.

The catalyst was this morning’s Conference Board Consumer Confidence Index, which beat expectations of by about 10 points. The Index improved considerably in April and now stands at 39.2, up from 26.9 in March. That is the Index’s biggest increase since November 2005 and its highest reading since November 2008.

There are two components to the Index: consumers’ present situation and expectations. The Present Situation Index was 23.7, up from 21.9 in March, but the Expectations Index rose to 49.5 from 30.2 in March. The Conference Board noted that "[t]he sharp increase in the Expectations Index suggests that consumers believe the economy is nearing a bottom; however, this Index still remains well below levels associated with strong economic growth."

Another green shoot? Perhaps, but it looks like another piece of "less bad" news. Consumer confidence improved because of the belief that the economy may be stabilizing, and the strong stock market rally off the March lows. Consumers still expect to see the economy deteriorate further in the near term, but at a slower pace than in recent months. More importantly, the Index remains near its historic lows and should be viewed in that context.

I would not get too excited about the more speculative retailers based on this report. Even if the consumer does rebound in the second half of this year, the retailers that will benefit the most are industry leaders like Wal-Mart (WMT - Snapshot Report) or Target (TGT - Snapshot Report) not retailers that are struggling to remain relevant in this difficult economic environment.