A cross section of the nation’s biggest chains -- from Wal-Mart and
Economic factors including still-high unemployment levels, as well as higher taxes and gasoline prices, are putting a crimp in consumer spending, retail executives said.
And when Wal-Mart, the bellwether of the retail industry, warns that business will be weak -- reporting declining foot traffic in its stores -- attention must be paid.
As “times are tough and it’s not easy for many Americans – they are watching every penny,” Wal-Mart will offer free layaway this holiday season and waive the sign-up fee, said chief merchandising and marketing officer Duncan Mac Naughton, in a press statement.
The program will run from September 13 to December 13.
Signs They Won’t Be Buying Gifts
Discretionary purchases are on the wane, which doesn’t bode well for the sale of “wants” versus “needs.” And it’s those “want” based purchases -- from apparel to perfume -- that drive holiday gift sales.
Instead, many shoppers are spending their discretionary dollars on cars and homes. Indeed, improvement in the housing market is driving home sales, which reflects the unleashing of pent-up demand.
Consumer spending on big-ticket necessities, namely cars and homes, is precluding other spending at Target, Gregg Steinhafel, CEO of the cheap chic retailer, said this month during a conference call with analysts.
Macy’s is seeing similar buying patterns.
“We believe that much of our weakness is due to the health of the consumer and the fact that consumers seem to be choosing to make purchases in non-department store categories such as cars, housing and home improvement,” said chief financial officer Karen Hoguet, during Macy’s second-quarter conference call.
Meanwhile, sales of cosmetics, fragrances, jewelry and watches at the department store “all softened in the second quarter relative to the first,” she said.
To jump start business, Macy’s will ramp up marketing efforts to propell fall sales.
Biz At Upscale Retailers Hints At Downbeat Christmas
Even luxury chains are feeling the slowdown.
Saks reported lower-than-anticipated second-quarter results this month. Weak sales of shoes and handbags forced the luxury chain to lower prices, executives said.
A Silver Lining?
Despite, the downbeat forecasts, not everyone thinks it’s a foregone conclusion that the holiday season will be a poor one for retailers.
“We expect a moderate gain for the season as a whole -- despite the gloom and doom that may be in the market in the aftermath of many of the earnings reports,” Michael Niemira, vice president, chief economist and director of research for the International Council of Shopping Centers, told Forbes.
The ICSC is forecasting a rise in Christmas holiday spending in the 3% to 3.5% range for either the GAFO (general merchandise, apparel and accessories, furniture and other sales) or shopping center sales metrics.
While the back-to-school season “may or may not be a good bellwether of the upcoming holiday season,” the ICSC’s surveys indicate that consumers waited until August to do the bulk of their back-to-school shopping, that’s why July’s sales numbers were weak, Niemira said.
“Fundamentally, the economy is improving and consumers are spending in fits and starts -- maybe more so than in past years,” he said.
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