Retailers Skittish Over Consumer Spending

By , Staff writer of The Christian Science Monitor

TX

CASH registers may be ringing at stores throughout the United States, but the message from retailers is that consumers are spending as little as possible - and looking for lower-priced merchandise.

"There is considerable apprehension [within the retail sector] about consumer spending, where the US economy is going, and when new jobs will be created," says Kurt Barnard, publisher of Kurt Barnard's Retail Marketing Report, a monthly journal on retail trends.

Recommended: Could you pass a US citizenship test?

The second quarter, ending in June, will be "a spotty quarter at best in terms of retail sales," Mr. Barnard says. "The quarter is likely to be flat, with sales up only 2 percent or so."

That follows a dismal first quarter, "which was just not good for a lot of retailers," Mr. Barnard says. In 1992, retail sales rose about 2.5 percent above 1991 sales, he says. Yet US retailers will be fortunate if they reach or exceed that level of growth in 1993. He predicts that total sales will rise only 1 to 2 percent this year, not even keeping pace with inflation.

Most major retailers, except for a few large regional chains, have released first-quarter sales and earnings. K mart, the second-largest mass retailer in the country behind Wal-mart, saw profits fall 57 percent. The decline was partly attributed to unseasonably cold weather earlier this year, which hurt sales of lawn and garden equipment, some household goods, and spring apparel.

Some companies, including Toys * Us and Lowe's, a building-supply retailer, have posted fairly good sales and earnings gains. But many other companies are expanding sales only by "marking down prices" through special promotions, says Janet Mangano, a retail specialist with Burnham Securities Inc. "Retailers are very skittish right now about the well-being of the economy and consumer spending; the retailers will tell you everything is fine. But I'm clearly hearing the nervousness in their voices."

That concern is not just coming from large national retailers. Optimism among small-business owners is declining, according to a survey by the National Federation of Independent Business (NFIB). The organization's business optimism index fell from 102.1 percent in January to 97 percent in April.

The April results put the index "at its lowest point since the first quarter of 1991," says Jeffrey Van Hulle, research fellow with the NFIB. The group is the trade arm for many small retailers and businesses, and its quarterly survey is based on polling responses from more than 2,000 firms. Over a quarter of the member firms in the NFIB are retailers.

The latest NFIB survey found that small-business executives expect revenues to decline during the second quarter of 1993. "They don't see much improvement coming in the economy," Mr. Van Hulle says.

The main problem for retailers is low personal-income growth. "Real disposable personal income grew at a 2.7 percent annual rate in the first quarter of 1993," Ms. Mangano says. The fourth-quarter rate in 1992 was 4.2 percent. In the first quarter of 1993 consumer spending grew at an annual rate of only 1.2 percent, compared with 5.1 percent in the fourth quarter of last year.

Shoppers are looking for "value," Mangano says. Retailers specializing in price-discounting and lower-cost value, such as Wal-mart, K mart, Home Depot, and Toys * Us, are well positioned to take advantage of current consumer unease, according to a study recently published by Salomon Brothers.

Consumers are shifting from the large suburban shopping malls that dominated retailing in the 1970s and 1980s, to smaller local malls, Barnard says. They are increasingly turned off by the large crowds found in the big malls, he says, as well as "the sameness" in the appearance of the stores. Smaller malls, by contrast, tend to have only one or two major retailers such as Marshall's, a discount store.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...