By Quentin Fottrell
Bargain-hunters felt the fear and shopped anyway, lured by department store price cuts in May. High-end store Saks Inc. and department store Macy’s Inc. both bucked the trend for weaker-than-expected retail sales, which shows that consumers responded to spring sales in Saks and – in Macy’s case – never-ending sales all year-round. Saks reported same-store sales up a staggering 20% in May, showing that those with more money in their pockets still shopped, while Macy’s had a respectable 7.4% uptick in sales, a strong performance for one of the nation’s mid-tier department stores. Both exceeded the 4.9% growth in overall retail sales in May, according to the 24 retailers tracked by Thompson Reuters. Gap Inc., the country’s largest apparel retailer, saw same-store sales down 4% in May.
But what does it all mean? Is this a case of extreme sales shopping? “The consumer is under pressure and mixed in with this stuff you have a few winners,” says Howard Davidowitz, president of Davidowitz & Associates, a New York-based retail consultant and investment bank. “We’ve just gone through the greatest capital markets in the history of the United States: 20% of the American consumers are doing phenomenal, which is reflected in luxury sales. The other 80% are wrecked. Wal-Mart has had eight consecutive declines in U.S. retail sales. Extreme dollar stores are terrific, but for 80% of Americans Wal-Mart is still expensive.” (A Wal-Mart spokesman says the store has a price-match guarantee. “The brand has been built on low-price leadership,” he says.) And the short-term economic outlook? Davidowitz says, “The worst has yet to come.”
Pay Dirt readers, do you agree with that assessment?