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Business

U.S. Retail Sales Show Solid Gain Despite Woes at Store Chains

Many analysts examining the decline point to a confluence of factors that aren't new but may be accelerating

Customers shop at a Bed Bath & Beyond, in New York, photo: AP/Mark Lennihan
2 years ago

Americans stepped up their online shopping and bought more autos in April, suggesting that consumers may be spending more than indicated by a slump among major retailers.

In a reassuring signal, the Commerce Department said Friday that retail sales climbed a seasonally adjusted 1.3 percent last month after a drop in March led by declining car sales.

But autos recovered in April, with sales jumping 3.2 percent. Sales growth was uniformly strong, online and off: Online purchases advanced 2.1 percent. Clothiers, restaurants, sporting goods stores, grocers, gas stations and even the embattled department store sector posted higher sales.

Only building materials stores suffered a monthly decline, though their annual sales growth was solid.

Over the past 12 months, total retail sales have risen 3 percent.

shopping-mall-509536_960_720

In response to their falling revenue, some stores have announced plans to try to boost profitability. Photo: Pixabay

April’s sales gains paint a healthier picture of retail spending than did a slew of troubling reports released this week by Macy’s, Nordstrom, Kohl’s and J.C. Penney. Their gloomy figures had raised fears that consumers were pulling back at a time of meager economic growth, and retail stocks fell sharply in response.

But Friday’s government sales data offered at least a tentative hint that consumers may not be retrenching so much as shifting their purchases toward online retailers such as Amazon.com and thereby sapping traffic from the large retailers that anchor America’s major malls.

At the same time, Ken Perkins of Retail Metrics, a research firm, notes that Americans’ incomes are rising only tepidly despite an improving job market. A result is that women may be less likely to step up spending on clothing at a time when Amazon has intensified price competition.

“My gut says that women don’t have the money outside replenishing items,” Perkins says. “And the Amazon effect is gaining momentum.”

Indeed, spending at non-store retailers — which include online and catalogs — has climbed a robust 10.2 percent from a year ago, according to the government. By contrast, sales at both department stores and electronics outlets have fallen over the past 12 months.

Shoppers such as Morgan Province of Herndon, Virginia, say they’re tightening spending for a variety of reasons.

Province says she’s saving for a summer move, and her tax refund was “unusually small” this year. She says that when she does buy, she’s spending more online. She’s now going to Amazon.com every two weeks, compared with every six or eight weeks a year ago.

“It’s more convenient,” Province says “It’s more affordable, and there are more options.”

John Blackledge, an analyst at Cowen & Co., says he expects Amazon.com to replace Macy’s Inc. as the No. 1 apparel retailer by next year.

Macy’s dropped its report with a clunk on Wednesday. It slashed its profits and sales outlook, and other major outlets, including Nordstrom and Kohl’s, also reported dismal sales figures.

In response to their falling revenue, some stores have announced plans to try to boost profitability. Nordstrom said it’s cutting back on inventory and reducing expenses. Macy’s plans to speed up launches for exclusive fashions, in addition to cutting expenses and plow the savings into adding sales help online and in the stores.

“Clearly, our industry is in something of a rough patch,” says Karen Hoguet, chief financial officer at Macy’s.

Yet Hoguet views the declines as puzzling given a recent hiring streak that has held unemployment to a healthy 5 percent.

“We’re frankly scratching our heads,” she added “We see the same economic data you all see and it would point to customer that would be spending more.”

Many analysts examining the decline point to a confluence of factors that aren’t new but may be accelerating. Shoppers are spending less on clothing in order to devote more their incomes to experiences like dining out. And when shoppers do spend on clothing, they’re more likely to spend it at T.J. Maxx and other off-price chains that compete by offering discounts.

“The big companies are suffering not necessarily from weak demand but weak pricing,” says Jack Kleinhenz, chief economist at the National Retail Federation. “There is no pricing power and we’ve been in a deflationary mode, so consumers are getting great deals when they are spending.”

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