Fashion’s brick-and-mortar retailers might not be seeing it, but shoppers are feeling much more optimistic.
The Index of Consumer Sentiment shot up to 94.7 this month from 89 last month, according to The University of Michigan’s Surveys of Consumers. That breaks a four-month run of declines when the index showed shoppers growing more dour.
“Despite the meager GDP growth as well as a higher inflation rate, consumers became more optimistic about their financial prospects and anticipated a somewhat lower inflation rate in the years ahead,” said Richard Curtin, chief economist of the Surveys of Consumers.
“The biggest uncertainty consumers see on the horizon is not whether the Fed will hike interest rates in the next few months, but the outlook for future government economic policies under a new president,” Curtin said. “This has increased their emphasis on maintaining precautionary savings, although the savings rate is not expected to increase much beyond its current level.”
The economist projected inflation-adjusted consumer expenditures would rise 2.5 percent this year and 2.7 percent next year.
IHS Global Insight economist Chris Christopher described the reading of shopper sentiment as “very good” and said, “Consumers are satisfied that the volatility and stock market worries of the first part of the year are behind them; therefore, consumer spending is likely to pick-up to a more robust growth rate and the saving rate is likely to fall a bit.”
Fashion retailers, particularly department stores, have yet to feel these good vibes, although many chains weighing in with tough first-quarter results expressed optimism for the second half.
Investors and analysts have become cautious on the apparel world, which seems to be facing particular apathy and more competition from the web.
Cowen & Co. analyst Oliver Chen this week made his case as to why clients should reduce their exposure to retail stocks, pointing to:
• too much inventory;
• share gains by Amazon;
• a reluctant consumer;
• election year anxiety; and
• a summertime retail stock lull.
Chen did have some caveats for investors. “We do not want you to lose sight of good long-term ideas which should prevail over time: off-price, elite global brands and nonapparel leaders,” he said.
On conference calls with investors, fashion’s top executives have over the past several weeks tried to explain how they are prepared to weather the current storm.
Guess Inc. chief executive officer Victor Herrero acknowledged the tough first quarter, but distanced his company from the troubled department store sector and expressed a readiness to shutter U.S. stores or renegotiate rents to help boost profitability down line.
He also stressed that Guess was a global player and one of the “very few U.S.-based retailers that has the majority of its revenues from outside the U.S.”