Macy's, Saks & Dillard's Sales Trail Estimates as Consumers Cut Back on Spending

Even if there were inflation, it's only going to suppress sales further in a world when stores and businesses can't sell discretionary goods at 1/2 off.

We all be shocked to find out what Americans can 'make' discretionary if they must.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0rrp1uLy8B4

Macy’s, Dillard’s Sales Trail Estimates on Spending Slowdown
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By Allison Abell Schwartz

June 4 (Bloomberg) -- Macy’s Inc., Dillard’s Inc. and Saks Inc. reported steeper May sales declines than analysts estimated as rising unemployment prompted U.S. consumers to save instead of spend.

Sales at U.S. stores open at least a year fell 9.1 percent at Macy’s, the second-biggest U.S. department-store chain, compared with the 8.8 percent average of analysts’ estimates compiled by Retail Metrics Inc. Sales at Dillard’s department stores dropped 12 percent, a bigger decline than the 7 percent analyst projection. Luxury retailer Saks’s sales plunged 26.6 percent; analysts had predicted 14.5 percent, on average.

Consumers are still limiting purchases and allocating leftover funds to necessities rather than discretionary items, according to Brian Sozzi, an analyst at research firm Wall Street Strategies in New York.

“Diminished job prospects, wealth evaporation and weak wage growth continues to be at the forefront of consumer psyche, meaning fewer dollars sloshing around the world of retail and lack of visibility into the back half of 2009,” Sozzi said in a June 1 note.

Retailers that managed to attract some of those dollars included Aeropostale Inc., Gap Inc.’s Old Navy division and TJX Cos. Their May sales beat analysts’ estimates, helped by lower prices and a focus on value.

Retail Metrics said U.S. comparable-store sales probably dropped 3.6 percent last month. The Swampscott, Massachusetts- based researcher said yesterday that while housing, construction spending and new factory orders are coming in “less worse” than expected, retailers and consumers remain under pressure as job cuts continue.

Smallest Portion

May accounts for the smallest portion of retailers’ second- quarter sales, according to Betty Chen, an analyst at Wedbush Morgan Securities in San Francisco.

Wal-Mart Stores Inc., the world’s largest retailer, said on May 14 that sales at U.S. stores and its Sam’s Club membership warehouse division may rise as much as 3 percent in the 13 weeks through July 31. The chain stopped reporting monthly same-store sales as of May 1, citing the difficulty of predicting shoppers’ behavior.

U.S. consumer spending fell for a second straight month in April as concern over rising unemployment and record wealth destruction prompted households to boost savings rates to the highest level in 14 years, according to the Commerce Department. The 0.1 percent drop was smaller than forecast and followed a 0.3 percent decrease in March, Commerce Department figures showed.

The savings rate rose to 5.7 percent, spurred by an unexpected jump in incomes linked to the fiscal stimulus.

‘Rainy-Day Fund’

“Until people feel confident in their employment and feel confident in their ability to maintain their housing situation, they’re going to continue to rebuild their rainy-day fund to the extent that they possibly can, and that translates to higher savings rates,” said Bryan Eshelman, managing director in the retail practice at Alix Partners LP, a consulting firm.

Retailers continue to cut prices. Aeropostale was offering 20 percent off women’s dresses. American Eagle Outfitters Inc. was giving 50 percent off the purchase of a second graphic t- shirt. American Eagle’s May sales dropped 7 percent, more than projected.

Companies in the U.S. cut an estimated 532,000 workers from payrolls in May, according to yesterday’s ADP Employer Services report. Economists surveyed by Bloomberg predict the U.S. unemployment rate for May will rise to 9.2 percent from 8.9 percent in April.

Still, confidence among U.S. consumers jumped in May by the most in six years. The Conference Board’s index surged more than forecast to 54.9, the New York-based research group said May 26.

“There is a bit of unfounded optimism out there,” Eshelman said yesterday in a telephone interview. “Once this economy turns the corner, I think it will turn the corner rather quickly, but the conditions have just not aligned to get to that point.”

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.
Last Updated: June 4, 2009 08:53 EDT

 

I'm not ready to predict armageddon, but I agree with the premise that a huge percentage of what we spend is very discretionary.

Obviously I'm talking mostly about middle and high income people, but even our "so-called" poor spend a lot of money on stuff that truly aren't necessities.

How many hundreds or thousands of dollars per year does the average American spend on electronics such as cell phones, flat screens and Wii's??

Even things that are considered necessary such as food and clothing could easily be slashed in half without feeling too much pain for the majority of Americans.

That spells trouble for retailers if things get worse. It could spiral into deflation, in my opinion.

I also think peoples' mindset has changed significantly as to what is really necessary and in regards to spending vs saving.

I believe that no more than at any time in the past 20 years or more, that frugality is becoming respected.

 

76% of retailers MISSED estimates....


More retailers will be shutting down before anything gets better.


Still too many storefronts all over the US.

Near me they are building new stores to house more clothing stores, go figure, like we need more of those.

 

Storefronts and stripmalls make could make for good public housing as more people lose their homes