USA: Aggressive Mark-Downs Fail To Pull In Shoppers
Sales figures released Thursday suggest consumers are spending less because they're feeling uneasy about their finances amid continuing volatility in the stock market.
"I think the Wall Street wealth effect has lost its luster. More and more people are beginning to limit their purchases," said Kurt Barnard of Barnard's Retail Trend Report in Upper Montclair, N.J.
"All of that makes for a public that is willing to spend money, but cautiously, not impulsively and not frivolously."
Results were better for some moderate-price and discount retailers, who had modest increases in sales and same-stores revenue figures.
The Bank of Tokyo-Mitsubishi retail sales index, which tracks sales at about 76 chains, rose 4.2 per cent in July from the same month a year ago, when the index rose 6.5 per cent. From January to July, the index rose 1.0 per cent, compared with a 2.5 per cent gain in the same period last year.
The figures added to what so far has been a disappointing summer for retailers. Sales started off slow in early June and never picked up, with the exception of a blip of buying around Father's Day.
July is traditionally a time for retailers to run clearance sales, but there were many more markdowns this year than usual, according to John Morris, an analyst with Gerard Klauer Mattison in New York.
"The clearance sales started a week earlier and they went a week longer," Morris said. "The retailers became aggressive in their markdowns through the course of the month, but the customer just wasn't buying."
Department stores for the most part had disappointing results. J.C. Penney & Co Inc, based in Plano, Texas, suffered a 3.6 per cent same-store sales drop. Sears Roebuck & Co. saw its same-stores sales rise 1.8 per cent, but most of the growth came in businesses such as hardware, lawn and garden and appliances.
One bright spot: Neiman Marcus Inc, which caters to upscale consumers, had a 14.7 per cent same-store sales increase.
"That is dramatic, but it only shows if you're rich, you're still spending," said Barnard, who believes the poor performance among department stores reflects a longer-term shift by consumers toward moderate-price or discount retailers like Wal-Mart Stores Inc, which reported a 6.2 increase in same-store sales.
Same-store sales exclude business from newly-opened stores, which tend to distort a company's sales figures. Industry analysts focus on same-store results in determining how well a retailer is doing.
Specialty retailers also had a difficult month. Among the hardest-hit was The Gap Inc, which reported late Wednesday its same-store sales fell 1 per cent. Its Old Navy stores chain did particularly badly.
Analysts say some of the slowdown is attributable to the economy.
After delivering spectacular returns for years, the stock market has been flat this year, making Americans feel less wealthy. They're also paying higher credit-card and mortgage rates, courtesy of six interest rate hikes since last summer by the Federal Reserve.
Morris believes the problem may be more fundamental: Stores just aren't selling the types of clothing consumers want to go out and buy.
"If designers and retailers offer compelling looks and merchandise, the consumer is going to buy it. The consumer is still healthy in economic terms," he said. "I don't entirely buy the argument that the closet's too full."
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