It's Not the Weather, It's the Depression
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As consumers get ready to celebrate July Fourth, many merchants already have dismissed summer as a washout.
Macy's flagship store has racks of summer tops, swimwear and dresses marked down as much as 50 percent, while luxury retailer Bergdorf Goodman is slashing prices on designer goods by as much as 70 percent. Meanwhile, piles of clothing as well as barbecue grills, tents and gardening tools are bypassing stores and heading straight to liquidators as merchants try to conserve their cash.
Such deep discounting so early in the season is great news for bargain hunters, but it's a worrisome sign that shows a further weakening in retail sales since the end of May.
Consumers' confidence in the economy, which had surged in April and May, is projected to be virtually unchanged for June when The Conference Board releases figures Tuesday. And major retailers will release June sales results next week.
While unusually rainy weather across a broad swath of the country has dampened business, some analysts wonder whether shoppers are waking up to the harsh reality that the economy won't be getting any better soon – even as consumer spending makes up 70 percent of economic activity.
That doesn't bode well for merchants, which need to get rid of summer inventory quickly to make room for fall goods that start to arrive next month.
BMO Capital Markets analyst John Morris estimated that the volume and size of discounts for mall-based apparel retailers he tracks is 10 percent higher than last June even though inventory is down 20 percent.
"It's the economy, not the weather," said Ahmed Youssef, a 28-year-old junior engineer from Jersey City, explaining why he's stuck to only necessities like groceries at Wal-Mart and computer accessories such as a $80 hard drive at Staples.
Pam MacWilliams, a tourist from Oshkosh, Wis., who on a recent Thursday was planning to scour for bargains at H&M's midtown Manhattan location with her two girls, said she's becoming less optimistic about a quick economic recovery.
"I thought that the economy would turn faster," said MacWilliams. "I had high expectations. Now, I want to save more."
MacWilliams, a nurse practitioner, said her company no longer matches her 401(k) contributions, and she worries about the job security of her husband, a professor. So she's spent only $200 this month on clothes for her family, compared with about $600 a year ago. She also hasn't loaded up her lake house with the usual summer accessories like blowup toys.
Employers are still cutting jobs – although at a slower rate – and home prices are still falling, and now Americans are seeing a three-month stock market rally stall.
July 2, 2009
Copyright © 2009 Associated Press
