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.

By Jason Notte Aug 19, 2013 8:40AM
Wal-Mart store in Secaucus, New Jersey (Jin Lee/Bloomberg via Getty Images)In an economy where disposable income is hard to come by even among the rich, it's particularly tough for businesses that cater to people with less cash on hand than most.

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.

More on moneyNOW

Aug 19, 2013 10:37AM
The economy has never really recovered since gas prices went over $3.00 a gallon.  Get prices back to around $2.00 a gallon(it only was only a few short  years ago when they were this) and the extra money the average person is saving at the pumps will be put back into the economy through retail, restaurants, vacations, etc..  The average family has 2 cars so that roughly equates to $640 a month if gas is $4.00 a gallon or $320 a month at $2.00.  If we were at $2.00 that gives families an extra $320 a month and multiplied by the millions of Americans that will definitely stimulate the Economy. 
Aug 19, 2013 11:03AM

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.  

Aug 19, 2013 10:27AM
"Uneven Recovery"  another name for it I guess!
Aug 19, 2013 11:33AM

the middle class is gone. 

you can stop using the word. 

there are two classes now. 

the rich and the poor. 
Aug 19, 2013 9:59AM
Again this morning Some very important stories yet comment threads have been disabled on many of the important ones.Anyone notice this?????
Aug 19, 2013 11:38AM

let's not forget how we got here 

legislating equality. thanks Bill Clinton. 

he wanted home ownership to hit 67.5%, it did... the only bad part was the majority of these were affirmative action loans. 

loans to people who should have NEVER been given one in the first place. 

by the the way, the second great country killer in the name of legislating equality is coming. Ofucucare.
Aug 19, 2013 10:45AM
This can't be true. The Obama administration continues to assure us good sheep that the economy is doing wonderfully, job growth is stellar, and there is no inflation. Not to mention Wall Street is at record highs which is so closely tied to Main Street. This article must be conservative Republican propaganda...has MSN been hacked?
Aug 19, 2013 11:21AM

the only recovery is the Obama phone crowd. 
Aug 19, 2013 10:30AM

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.

Aug 19, 2013 12:27PM
Everything that we need to live costs more and at the same time wages are not going up. Wall Street is setting records which mean nothing to the common working man because it does not help them in any way, shape, or form. The rich are getting richer while the working man is being shoved further in the ground and nobody seems to care. Too much Greed and Manipulation on Wall Street for things to get any better.
Aug 19, 2013 11:35AM

the good news for the economy is Obamacare. lolllll

can't wait to see how Ofucedcare plays out. 

About twenty more cities will look like Detroit. (the black cities of course)
Aug 19, 2013 3:24PM
I'm not sure why everybody is so surprised that middle retail is disappearing? We've lost CITIES people? Towns all across America have been closing or gone bankrupt since 2007. Look, I wasn't around during the Great Depression, but my dad was, and the stories he told me about that time period in American history are all ringing true again. He said: First, wide spread unemployment and homelessness happened. Then the closing of small towns along with the disappearing of mom n pop stores (that's already happened); then middle retail and "cities" began filing for bankruptcy (that's happening now); next was large retail and businesses closing. O.K., does any of that sound familiar? Yep, a full-out depression is coming folks, and it's right around the corner, we can't stop or avoid it. Joblessness, homelessness and crime all on the rise, another sign. And I don't care how the media or Washington spins it, we can all see this continual deterioration in own communities, and it's not getting any better. Big business has gone overseas taking manufacturing and technology based jobs with them, oil prices are crushing American families, Wall Street keeps getting richer; Washington keeps spending, on and on, still more signs. I really hate to a Debbie-downer, but does anybody out there think, for one minute, that we "can't" go the way of Greece and Egypt? I honestly see no way of avoiding it, we did it once before, and if it wasn't for WWII and the rush to create manufacturing jobs we would've never recovered from that one either.
Aug 19, 2013 1:31PM

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.

Aug 19, 2013 12:02PM
"Boston is no where near looking like Detroit and they've had Obamacare for some time."

this isn't rocket science.

the first cities to fall... continue falling are the ones with the heaviest black population. 

you could use Google to see what they are and how well they are doing. 

nah, i'll help you - they are failing fucin miserably. 
Aug 19, 2013 12:26PM
Aug 19, 2013 12:18PM
Are you seriously going to deny that you are nott "Regalman"  and the other 6 alias's ??
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 .
WOW !!!!

Aug 19, 2013 1:01PM
We have been in trouble for a long time. GW Bush's economy was all based on debt too. 
Aug 19, 2013 3:55PM

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.

Aug 19, 2013 1:02PM

‘We can do this without Congress’: Obama working to unilaterally impose tax on cell phones
Aug 19, 2013 4:10PM
I took the liberty of forwarding your post  TO

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