Consumers remain in shell, report shows
Shoppers remained tight-fisted in July, raising concern about the back-to-school and holiday shopping seasons as well as for the broader economic recovery.
The big worry is that frugal parents will focus on outfitting their children this fall with just necessities like notebooks and jeans. And fear is bubbling up that parents might consider any extra splurges early Christmas gifts.
The persistent pullback despite signs of a stabilizing economy could stall the overall recovery; consumers account for 70 percent of all economic activity.
A monthly compilation of more than 50 retailers’ results by The International Council of Shopping Centers and Goldman Sachs showed overall same-store sales fell 5 percent in July compared with the year-ago period.
"The consumer is stressed and depressed," said Ken Perkins, president of retail consulting firm Retail Metrics. "Back-to-school shopping season is going to be very late."
Worries about job security, retirement accounts and home values have made consumers focus on necessities like food and other basics. But stores are also grappling with a newly adopted frugality as consumers — even those that have jobs and feel secure about their assets — learn how to save and stick to a budget. That fixation on frugality is likely to linger even after economic worries dissipate.
Michael Dart, a retail strategist and leader of private equity practice for consulting firm Kurt Salmon Associates, believes that based on what he’s been hearing from consumers, some of those purchases may even double up as Christmas gifts as shoppers remain tight-fisted. "Shoppers are becoming much more practical," Dart said.
The bargain-hunting played out again in the retailers’ reports, with mall-based apparel stores faring the worst cheap credit report. Among the disappointments were Macy’s Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc.
The few bright spots were apparel discounters like Ross Stores Inc., and TJX Cos., operator of the T.J. Maxx and Marshalls chains, both of which reported sales gains — a rarity right now — that well exceeded Wall Street estimates.
A number of special factors also depressed July’s sales results. Lean inventories left fewer clearance options for bargain hunters, as stores wanted to protect themselves from getting stuck with piles of leftovers. And NPD Group Inc. chief retail industry analyst Marshal Cohen fears that lean back-to-school inventories, particularly at department stores, could stall sales this fall — if shoppers can’t find what they want.
The shift of the sales-tax holidays from July to August in most of the 14 states that have them because of a late Labor Day weekend also stole momentum from July.
Perkins and other analysts have also noted that the uptick in car buying spurred by the cash-for-clunkers" program might siphon sales from other categories like clothing and home furnishings. That could hurt back-to-school shopping as consumers shift available cash to car payments.
Merchants are seeing indications that sales decreases are easing. However, retail sales remain weak even amid signs of economic stabilization, including signs of life in the real estate market. One big factor has been job security. When the Labor Department releases its monthly jobs report today, economists expect it to show unemployment ticked up to 9.6 percent in July, close to its post-World War II high.