Something like three quarters of our economy is based on consumer spending and one of the major components of that is retail sales. As you may know many retailers derive as much as 90% of their total annual revenue from the sales made over the roughly 75 day period from October 15th to December 25th. Retailers have predicted a roughly 1% decline in holiday sales from last year. That’s painful to be sure but nothing like as bruising as last year’s decline or the overall decline in sales of 3% expected for this year overall.
So, how are we fairing so far? Not too good. This table reports the retail sales for October 2009 as well as comparative figures and percentages for last year and October 2008. Some major retailers are clearly in trouble. For example, the 330 store chain Dillard’s is reporting a year-to-date decline of 12% and a decline of 8% relative to October of last year. Considering that they recorded an 8% decline last year relative to 2007, it looks to me as though things are pretty grim for Dillards. I wouldn’t be surprised at store closures or worse after the first of the year. Since Dillards has grown largely via acquisition I suspect that credit is becoming a problem for them, too.
Other retail chains with cause for concern include J. C. Penney’s, Bon-Ton, and Macy’s (although Macy’s had a pretty good October). Discounters like Costco, and TJXCos (T. J. Maxx and Marshall’s) are the bright spot in retailing indicating that shoppers are looking for bargains.
Here’s another report of the condition of retail:
Affluent shoppers, who had been tight with their purse strings since the financial meltdown ballooned last year, spent more for designer duds, delivering solid gains for Saks Inc. and Nordstrom Inc.
Other bright spots were Costco Wholesale Corp.; TJX Cos., which operates T.J. Maxx and Marshalls; and Gap Inc. But sales at most teen merchants were weak.
October’s reading excludes results from Wal-Mart Stores Inc., the world’s largest retailer, which stopped issuing monthly sales reports earlier this year.
Frankly, I think that those who are forecasting a recovery in retailing are whistling past a graveyard. General retail sales are still below what they were in 2006 and lots and lots of loans are coming due without a robust banking system to back them up. Another round of store closings will further reduce employment which will further tighten spending.
