By Al Lewis
The economy will never recover if Americans do not shop, but
Americans are not in the mood to shop.
A report released last week by Sentier Research showed median
household income in the U.S. is 6.1% lower than it was in December
2007, just before the economy crashed. Too many consumers remain
unemployed or re-employed at a fraction of what they used to make.
They're paying higher payroll taxes and suffering spikes in the
price of just about everything they need. The Federal Reserve may
be pumping trillions of dollars into the banking system, but it
isn't trickling down to them.
Our economy runs on spending and consumption, not savings and
production. But credit-card debt has been coming down since the
financial crisis of 2008, and a dearth of consumer spending is
choking retailers.
Target Chief Executive Gregg Steinhafel reported a 13% decline
in profits last week and warned of "continued cautious spending by
consumers in the face of ongoing household budget pressures."
He must have bought that line at Wal-Mart Stores. "The retail
environment remains challenging . . . as customers are cautious in
their spending," said Wal-Mart's chief financial officer, Charles
Holley, a week earlier as the world's largest retailer reported a
slight decline in same-store sales.
J.C. Penney seems like it's going to be hard-pressed to avoid
bankruptcy. It posted another loss, of $586 million.
Ron Johnson -- who will be remembered forever as that guy who
wrecked J.C. Penney -- has been ousted. But Mike Ullman, his
successor, can't undo the damage from someone who thought he could
turn a middle-market department-store chain into a highbrow
boutique outlet while consumers were cutting back.
"There are no quick fixes to correct the errors of the past,"
Mr. Ullman said last week.
Sears Holdings, which also owns Kmart, should be applauded for
the fact that it is still around. It reported a 1.5% drop in
same-store sales.
Barnes & Noble said its latest quarterly loss doubled, to
$87 million. Yeah, I know, who reads books anymore?
Retailers that should have died a long time ago aren't the only
ones hurting. Macy's reported disappointing results and pulled back
on its forecast as well. "Much of our weakness is due to the health
of the consumer," said Chief Financial Officer Karen Hoguet.
Do you see a pattern here? Because not everyone does.
"We think this is just one of those shorter-term blips," said
Michael Koppel, chief financial officer at Nordstrom, which
reported higher sales, but lowered its future guidance.
"The reasons for the weak traffic are not entirely clear," said
Mike Jeffries, CEO of Abercrombie & Fitch. "Our best theory is
that while consumers in general are feeling better about the
overall economic environment, it is less the case for the young
consumer."
Maybe it's just that pesky 23.7% unemployment rate for
teenagers.
Many people who follow retail say the overall results were
"mixed." One bright spot was Best Buy, which reported a 13% surge
in profits. But this was largely from cost cutting at a chain
that's still in danger of becoming the next RadioShack. Same-store
sales, and overall revenues, were down, but not as bad as previous
quarters.
Home Depot's earnings were up 17% and Lowe's 26%. Home Depot CEO
Frank Blake credited "the recovering housing market." We'll see how
long that lasts as mortgage rates climb back to normal levels.
Clearly, retailers need your help. Please send me an email at
al.lewis@tellittoal.com and tell me why you're not buying.
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Al Lewis is a columnist based in Denver. He blogs at
tellittoal.com; his email address is al.lewis@tellitoal.com