More pain ahead for retailers as consumers stay cautious
By: Reuters | Feb 25 2016 at 06:04 PM | International Trade
Discouraging results from three key U.S. retailers underscored shoppers' reluctance to buy discretionary goods such as electronics and apparel, an indicator that consumer spending would remain muted this year.
Electronics retailer Best Buy Co Inc, department store operator Kohl's Corp and Sears Holdings Corp all reported weaker-than-expected sales at stores open at least a year.
A decline in stock markets, led by a slowdown in China, has prompted consumers to be more prudent with their discretionary incomes. Even with gas prices at multi-year lows, falling real median incomes have further tightened purse strings.
"Both Wall Street and Main Street households have begun to watch their spending, as we've seen both in our store checks and in higher personal savings rates, which have been rising ever since last May," retail research group Customer Growth Partners' Craig Johnson said.
Instead, consumers are saving more or spending on big-ticket items such as homes, home renovations and cars.
An unusually warm winter has also played a key role in shaping shopping trends these past two quarters.
While home-improvement chains such as Home Depot and Lowe's Inc benefited from the mild weather as outdoor and home remodeling activities rose, retailers Macy's Inc, Sears and Kohl's struggled to sell coats, gloves and woolens.
But analysts said they expected the uncertainty to continue through the year.
U.S. retail sales, excluding autos, gas and restaurants, will increase by 2.4 percent in 2016, compared with a 3.6 percent growth last year, retail research firm Customer Growth Partners said in a report.
This reflects "flatlining" incomes for all but the top 20 percent of households, the diminishing effects of lower gas prices, and the decline of the "wealth effect" due to the recent $2 trillion decline in stock market values, the report said.
Kohl's reported a 0.8 percent rise in established-store sales, below analysts' expectations, and said it planned to close 18 underperforming stores this year.
Kohl's CEO Kevin Mansell said because of a difficult macroeconomic and retail environment, the company was unlikely to meet its 2017 sales goal of $21 billion.
Comparable-store sales at the once-iconic Sears stores fell 6.9 percent, in line with estimates. Those at Best Buy fell slightly more than analysts had expected as demand for mobile devices and computer electronics continued to falter, according to research firm Consensus Metrix.
These lackluster performances follow disappointing results from Macy's, which reported a 4.3 percent decline in same-store sales.