Most Recent Articles In Trends and Analysis
Latest Trends and Analysis Articles
- What Market Volatility Means for Fashion Apparel and Retail Stocks
- Retail Sales Flat for Week
- NRF: B-t-s Shopping Continues at Lethargic Pace
More Articles By
Consumers began receiving their tax rebate checks last week, and at least one retailer is trying to live up to its motto of “saving people money so they can live better.”
This story first appeared in the May 5, 2008 issue of WWD. Subscribe Today.
That was the goal that Sam Walton envisioned when he opened his first Wal-Mart 40 years ago. Last week, Wal-Mart Stores Inc. said it will cash the economic stimulus checks for free, with no purchase at the store required. Moreover, the discounter is offering rollbacks on prices of items from shampoo to lunch meat and cereal. Over the coming weeks, the Bentonville, Ark.-based discounter said it will add more rollback items to help shoppers stretch their dollars.
The retailer also plans to unveil an online advice program early this month to help consumers stretch their family budget.
But how much will actually be spent at retail remains to be seen.
A National Retail Federation survey conducted by BIGresearch concluded that consumers plan to spend 40.6 percent of the tax rebate checks, which is expected to provide a $42.9 billion boost to the economy. The balance is expected to be used for savings and paying down debt.
Trips to the grocery store and to eat out have become increasingly expensive, sapping consumers of at least some of their ability to make discretionary purchases.
White bread prices jumped 16.3 percent in March versus a year earlier, as milk prices advanced 13.3 percent and prices on all food and beverages inched up 4.4 percent, according to the Labor Department.
The pressure on budgets also expands well beyond food.
Household energy prices shot up 6.8 percent in March as the purchasing power of the consumer dollar slid 3.9 percent. And feeding the automobile has gotten expensive, too, as gasoline prices across the country are averaging $3.62 a gallon for regular, according to the American Automobile Association.
“Nothing influences a consumer more than the prices of groceries and food,” said Richard Yamarone, chief economist at Argus Research Corp. “Gasoline prices, we complain about them, but if you adjust them and look at them in comparison with the world, they’re not too bad.”
Women who control household expenses tend to hold off on purchases for themselves as their visits to the grocery store become more expensive, he said.
“She’ll get necessary bills paid, but she’ll skimp on or postpone a purchase for herself,” said Yamarone, noting women are apt to cut back on apparel as well as cosmetics and jewelry.
Customer Growth Partners president Craig Johnson said his firm has noticed a pickup in sales at retail in mid-April, with traffic in some malls and off-mall venues increasing. Wal-Mart and value chains such as TJX Companies Inc. are doing particularly well, he said.
“There are still some places in the ditch, such as women’s apparel retailers, which are struggling,” Johnson said.
While Johnson believes there’s been a bit of pent-up demand among shoppers following the dreary winter months, he said that much of the pickup likely stems from the easing on home heating bills now that the calendar is shifting into spring.
“It’s the time of year where many who run the household budget from paycheck to paycheck no longer have to worry about home heating bills. That’s a $19 billion bill that now no longer impacts discretionary spending,” Johnson said.
Apparel prices fell 1.4 percent in March as sales at apparel and accessories stores were down 1.6 percent and sales at department stores slid 4.1 percent, according to sales figures from the Commerce Department.
“If confidence is historically low and the economic news is we’re in recession or near recession, the likelihood of people adjusting their behavior to go back to spending in restaurants or on high-end apparel or more discretionary items is going to be delayed,” said Keith Stock, president of First Financial Partners Inc., a private investment firm.
In the end, it is the confluence of pressures, from high prices to slow economic growth, that really bites down on consumer spending.
“The problem is that consumers are so squeezed from so many different directions right now,” said Scott Hoyt, director of consumer economics at Moody’s Economy.com. “They’ve got the double whammy of food and energy prices.”
These increases are happening against the backdrop that includes a weakening labor market, declines on Wall Street and ongoing trouble in the housing sector.
“To some degree, it’s the fact that they’re hitting in combination that’s the big problem,” said Hoyt.