Retailers are feeling the benefits of a slowly improving economy, but the effects aren’t yet filtering down to their customers.
Consumers’ misgivings about jobs and the overall economic environment sent The Conference Board’s Consumer Confidence Index down sharply this month even as three major retailers Tuesday reported results that were substantially better than those registered during the dismal final quarter of 2008. The disconnect between the earnings and confidence data dramatizes that, despite hints of optimism among stores and their suppliers, the nascent economic recovery continues to be hobbled by consumers who don’t yet feel upbeat enough to createsustained top-line growth.
That means there’s no let-up in the pressure on retailers to continue to manage their businesses, and their balance sheets, with unprecedented caution and thrift.
After three straight months of improvement, the Consumer Confidence Index this month dropped to 46, its lowest level since April, from 56.5 in January. The weight of the public’s anxiety about jobs and other missing elements of recovery was reinforced by a drop in the Present Situation Index to 19.4, the lowest mark in 27 years, from 25.2 last month. The forward-looking Expectations Index dropped more, but from a higher level, declining to 63.8 from 77.3 in January.
Wall Street reacted negatively to the weak figures. The S&P Retail Index dropped 1.87 points, or 0.5 percent, to 411.74, the Dow Jones Industrial Average finished with a 100.97 point, or 1 percent, fall to 10,282.41 and the S&P 500 and Nasdaq Composite were off 1.2 percent and 1.3 percent, respectively. (For more on stocks, see page 14.)
Lynn Franco, director of The Conference Board’s Consumer Research Center, noted “fewer consumers [were] anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending.”
Speaking in California, Janet Yellen, president of the San Francisco Reserve Bank, added to the angst with comments indicating that businesses, such as the retailers reporting on Tuesday, will continue to emphasize improvements in efficiency and productivity “for some time. If this is the case, the rate of job creation will be frustratingly low.”
Brian Bethune, IHS Global Insight’s chief U.S. financial economist, attributed the index’s decline to “a confluence of unusual factors,” including the renewed resurgence in financial volatility connected with sovereign debt issues in Europe, severe weather conditions on the East Coast and slow progress on a jobs bill from Washington.
These came “despite widespread evidence that the U.S. recovery is progressing at a very solid rate. The drop in confidence may take the wind out of the sails of consumer spending briefly, but we do not see it as a major game-changer in terms of the progress of the recovery,” he said.
UBS economist Maury Harris noted that recent reports from retailers “show no evidence of any sudden weakening in spending in February.…The Conference Board survey tends to reflect labor market conditions to a greater degree than other indexes, likely accounting for some of the weaker performance.”
Nonetheless, the weak consumer confidence figures only add to the evidence of lackluster demand at retail. The NPD Group Inc. reported Tuesday that U.S. apparel sales last year declined 5.2 percent to $188.53 billion, with women’s apparel off 4.9 percent to $104.05 billion and men’s down 5.8 percent to $51.06 billion. Declines were largest among upper-income consumers (20 percent) and teens (9 percent) while consumption among middle-income consumers, defined as those earning $25,000 to $75,000, remained unchanged.
And the string of major retailers reporting Tuesday may have registered profits, but the numbers came against extremely weak figures a year earlier. Sears Holdings Corp. said quarterly profits jumped 126.3 percent, while Target Corp.’s rose 53.7 percent and Macy’s Inc. returned to profitability after a year-ago loss.
Here, a breakdown of the retailers reporting Tuesday:
Macy’s swung to a fourth-quarter profit, earning $466 million, or $1.10 a diluted share, compared with a loss of $4.77 billion, or $11.33, in the year-ago quarter. Excluding one-time charges, the retailer earned $1.40 a diluted share in the quarter, beating guidance of between $1.35 and $1.37.
Fourth-quarter sales fell 1.1 percent, to $7.85 billion from $7.93 billion, and slipped 0.8 percent on a comparable-store basis, better than the 1 to 2 percent drop expected.
“The fourth quarter represented a clear-cut improvement in sales trends from earlier in the year, driven by success from My Macy’s, a 26.6 percent increase in online sales and a significant rebound at Bloomingdale’s,” said Terry Lundgren, chairman, president and chief executive of Macy’s Inc.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)