Why retailers are facing an uneven recovery
Stores that cater to the cash-strapped middle and working classes are struggling, while higher-end shops are thriving.
As the folks at Macy's (M) can tell you, the economy doesn't recover evenly. The midlevel department store chain reported its first decline in same-store sales (sales at stores open for at least one year) in nearly four years this week, and it noted that shoppers who do come through the doors are leaving with cheaper items. It's higher-end Bloomingdale's chain, meanwhile, is seeing shoppers leave with their Big Brown Bags laden with goods.
Wal-Mart (WMT) reported Thursday that even with its rolled-back prices, same-store sales in the U.S. fell 0.3% last quarter. That second quarterly decline in a row prompted the world's largest retailer to trim its forecast for the year.
Costco (COST) and Gap (GPS) reported only modest earnings increases in July. And the outlook is less than favorable for coming reports from Sears (SHLD), J.C. Penney (JCP) and Target (TGT) -- which cut its profit forecast in May, thanks to weak sales. Clearly, stores that cater to the lower reaches of the middle class and to the working class are telling the other side of the economic recovery story.
While July auto sales were up by 14% from last year and analysts are expecting a 7% bump in Home Depot's (HD) same-store sales, the slump at retail outlets selling to the middle and lower classes hints at a far less rosy picture.
In July, U.S. employers slowed their pace of hiring. The Bureau of Labor Statistics notes that just more than 1 million teens ages 16 to 19 found jobs in May and June, down by 2.1% from last year. Though the number of unemployed teens of that age shrank from 1.86 million in June 2012 to 1.4 million this June, the number holding down a job also shrank from 5.2 million to 4.5 million.
That's a lot of teens who just jumped out of the workforce, reducing the participation rate from 41% of all workers ages 16 through 19 last June to just 35% this year. Same-store sales declines at mall chains including Aeropostale (ARO) and American Eagle Outfitters (AEO) indicate that teens are not only not working in these shops as much as they once did but they and their friends aren't spending what little money they have there.
The average price for a gallon of gasoline is down 16 cents from a year ago, according to the Department of Energy, but it still sits at $3.54. That's while wages are also going nowhere, falling by 0.1% between June 2012 and June 2013, according to the U.S. Bureau of Labor Statistics. A recent government report showed 5.7% of Americans who had jobs in July could not get enough hours to qualify as full-time workers, the same percentage as in June.
As a result of all of the above, both Wal-Mart and Macy's say customers aren't spending on nonessentials and are putting off tasks including back-to-school shopping until the last minute. If a recovery is underway, those shoppers and the retailers that serve them aren't seeing it.
Higher end retail starting to thrive while middle and low end retail starts to decline is a wake up call for the middle class.
It's proof positive that the middle class is getting pounded. You're either lucky enough to climb another rung of the ladder to the next class or you are slipping down into the next lower class. I personally have slipped from my once solid middle class footing into a lower class. In the last 3.5 - 4 years my lifestyle and spending habits have changed quite a bit........and I don't foresee them rebounding due to the outsourcing of my bread and butter means of earning a living.
let's not forget how we got here
The fed should have only three jobs.
1. Maintain an accurate and honest CPI.
2. Keep the real inflation rate between a deflationary 1% and 0% inflation (no more inflation). This will increase the purchasing power of the consumer. Also, this will bring real earnings to saving. If, savers can earn real income on savings, interest rates will stay low. Also, it will increase the value of the dollar. This would move money to America (an estimate 5 trillion dollars).
3. Replace the fed with a computer program ASAP.
the good news for the economy is Obamacare. lolllll
You it's just terrible when common American attack each other. This behavior sounds like our Congress and President right now. Despite all this disagreeing something needs to be done. Clearly if We The People can agree on something to be done it will be done, so continue to fight each other and nothing will be fixed. I can point to several examples where the people forced change in the 60s and 70s, but I won't give you a history lesson. I think you remember the civil rights movement, the end of the Vietnam War, and so many other changes the people have caused to happen throughout history.
This economy is in terrible shape because of greed, failed leadership, and politicking and I for one am sick of all it.
Are you that FCKING dumb , Really ?
It's SOOOOOOOOO obvious , fool. You've GOT to be the dumbest human on this planet
THAT'S why you're a broke beggar fool - tiny brains don;t do well in life .
Classic Lady;I`ve been kind of busy counting my money since the market is up 90%
with Obama.My cousin still takes credit for Obama winning the election in 2008.He pounded
signs up and down routes 71 and 77 in Ohio that read "Republicans vote Nov. 5th"The
election was actually November 4th.Thousands of Republican voters showed up Nov.5th
and were turned away.
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