By  on August 28, 2013

The second-half storm clouds are gathering.

Consumer incomes are weak, the stock market is starting to look overvalued and apparel retailers have inventory piling up. There is also no obvious must-have item or trend to excite the desires of shoppers, who are focused on new cars and new gadgets.

Fashion might just have to wait and hope on next year, once again, for any kind of a real rebound.

A WWD study of analyst projections for 21 major retailers showed that Wall Street expects second-half earnings per share to fall 1.8 percent versus a year earlier, while sales inch up 2.3 percent to $400.27 billion. Excluding the giant Wal-Mart Stores Inc. the picture darkens even more, with earnings slated to fall 2.2 percent on a sales gain of just 0.4 percent.

“It’s still going to be something of a tough slog,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics, of the second half. “We’re expecting things to improve modestly, largely because the worst of the fiscal drag is over. At least the current round of cuts to federal spending has been completed — not to say there’s not another round coming.”

Government employees have been taking furloughs in recent months to help plug holes left in the federal budget.

While there are some positive signs — those furloughs are winding down now, and the housing market is perking back up after years of weakness — Hoyt said fashion retailers are likely going to have to hold on until 2014.

“Next year should look better,” he said. “There’s still a lot of pent-up demand. The more job growth we get and the longer job growth continues, the more people are going to need to refresh their wardrobes.”

Chris Christopher, U.S. economist at IHS Global Insight, said consumers have settled into the new economic realities enough to, for instance, buy a new car, but that they’re still being careful with apparel.

Sales at car and motor vehicle dealers rose 12.5 percent over the May, June and July period, while sales of apparel and accessories stores rose just 4.2 percent, according to the Commerce Department.

Christopher said apparel sales could come back next year.

“Wages are sort of anemic,” he said, setting the scene for 2014. “They’re still growing, but what’s a positive for the consumer is that prices are not growing as fast as wages, so they have a little bit of spending power on their side.”

Until next year, retailers will also be competing against their own performances a year earlier, when consumers were still scrambling to jump into a strong color trend.

“I don’t think there are any must-have items,” said Christine Chen, senior investment analyst, global consumer, at Ashfield Capital Partners. “The second half, broadly speaking, it’s going to be tough because of the anniversarying of the color [trend].”

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Retailers are also pivoting from what was a more optimistic start to the year and will be working to get inventories in line with sales.

“I wouldn’t say inventories are a disaster, but I don’t think they’re lean either,” Chen said. “Retailers are hoping things are going to pick up.”

But the unsteady, years-long crawl back from the financial crisis has made it hard to guess what shoppers might do — and to plan businesses around them.

“The consumer has been notoriously hard to read,” said Paul Nolte, managing director with Dearborn Partners, noting some economic indicators have the consumer trending toward recession territory.

“When you take a look at what the consumers [are] actually doing, they’re spending at an OK clip, not fabulous, but enough to keep things going,” he said.

Retail stocks have been on a run this year, but that might be ending.

The S&P 500 Retailing Industry Group fell 1.8 percent, or 14.68 points, to 807.70 Tuesday, but is still up 23.7 percent for the year so far — a standout performance given the Dow Jones Industrial Average’s 12.8 percent increase.

Nolte said investors have cooled to the market recently and are moving out of shares of retailers, consumer staple companies and utility firms in favor of energy, health care and basic material concerns.

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