Deloitte study says price-based and high-end retailers are doing well.

Enjoy it while you can.

Most retailers have been on an emotional high since last quarter, when holiday sales rose 4.7 percent. But there’s a growing undercurrent of concern that, despite the nation’s low unemployment rate at 4.1 percent, moderate wage increases, tax cuts and elevated consumer confidence, the recent retail momentum won’t be sustained through the year. For department stores and fashion specialty retailers, as they wait for spring weather to click in to spur spending, the vexing question is whether last quarter’s lift was a blip – or something signaling a firm consumer comeback at last.

“You need at least two or three quarters before you can say retail is back,” said one chief executive officer of an upscale brand, adding that fall orders are “a little down” from a year ago, suggesting a sober outlook in contrast to the fourth-quarter high. Major bankruptcies this year by Toys ‘R’ Us, Claire’s, Charming Charlie, A’Gaci, Bon-Ton and, on Friday, Nine West; ongoing store closings across a spectrum of retailing; divisive politics; new tariffs against and by China, and stock market gyrations all blur the outlook.

One retail ceo put it in perspective: “You couldn’t have asked for a better fourth quarter. The weather was great for shopping, the expectation of tax cuts pushed consumer confidence up and department stores and fashion specialties were up against depressed numbers from a year ago. People are still on a high because of the Easter shift,” pushing business into March from April.

“But I don’t think anything has really changed. Seasonal businesses are under pressure,” he added.

“Clearly, the retail industry has improved, coming off a low base from a year ago,” said Stephen Sadove, principal of Stephen Sadove & Associates, founding partner of JW Levin Management Partners and retired chairman and ceo of Saks Inc. The consumer is “feeling better” and recent positive sales trends and tax benefits give retailers “a little bit of breathing room to take the initiatives they need to,” Sadove said. “But [business] is not as good as some people think right now. There’s no reason for people to get euphoric.”

According to Bill Taubman, chief operating officer of Taubman Centers, “There is no question that there is a change in the environment.” The 2016 presidential election depressed retailing that year, making comparisons easy in 2017. The extra week in February further helped last year’s results. Still, Taubman believes the change in the consumer mind-set “is not a flash in the pan.”

“It was not a one-trick pony this holiday,” said Craig Johnson, president of Customer Growth Partners. “Last holiday was the best since 2005. We do think there is staying power, though there are some subtleties in that. People ramped up their credit card spending over Christmas. Personal saving rates dropped to 2.4 percent in December, which is extraordinarily low. The U.S. normal is like 4 percent. That’s the bad news. The good news is that people spent January and February paying off their credit card bills. They took a breather after the Christmas spending spree. That did cause some softness but since the last three or four weeks, things have picked up strongly in most parts of the country.”

Johnson said apparel is up 4 percent year-to-date, the best gain since before the Great Recession, with some shift in the cycle as tailored looks catch up to dresses and sweats. “Off-price is still the superstar and performance and active wear has had a second burst of speed,” he said, citing Lululemon and Athleta. “The teen sector is doing quite nicely” after a prolonged slump, Johnson added, citing good performances at American Eagle and its Aerie division, Hollister and Abercrombie. “What we are seeing is a lot of balanced growth — that’s the sign of a healthy retail economy,” said Johnson, though he noted that misses apparel remains generally weak.

Other market sources said that the women’s apparel business has stabilized overall. Trending are denim, distressed jeans and jeans with hemline interest, florals, ginghams, tops with novelty sleeves, men’s wear plaids and blazers, while the active, loungewear and dress businesses continue to hold up.

Retailers are also benefiting from landlords demonstrating greater flexibility with leases in reaction to vacancies stemming from bankruptcies and brick and mortar consolidations. That’s encouraging certain other retailers to open new doors or reconsider questionable locations, provided they get better rent deals. “There’s a more realistic attitude,” said Mortimer Singer, ceo of Marvin Traub Associates.

Singer also sees an “influx” of foreign brands coming to America — such as Ba&sh, a French contemporary brand — as a sign of an improving retail outlook. Other foreign firms investing in the U.S. are U.K.-based JD Sports, which recently agreed to purchase American footwear retailer Finish Line, and Australian luxury ready-to-wear brand Scanlan Theodore, which last month opened a U.S. store in Manhattan’s Flatiron District and will open more in and outside the city.

Brands once selling only online are developing bricks-and-mortar, either permanent locations or pop-ups. Examples would be Amazon, Warby Parker and Everlane. M. Gemi, an online-only brand for Italian handmade shoes, two weeks ago opened its first in-store fit shop inside Bloomingdale’s 59th Street, where customers can get custom-fitted shoes and where every Monday, new products are displayed.

According to the National Retail Federation, retailing is in for a good year, with sales seen rising 3.8 percent to 4.4 percent over 2017. Online and other non-store sales, which are included in the overall number, are expected to increase between 10 and 12 percent, the NRF said.

Some retailers are not so bullish. Macy’s, which reported a 1.3 percent gain in fourth-quarter sales after ten consecutive quarters of sales declines, said it expects fiscal 2018 comparable sales to be flat to up 1 percent. Target expects a low-single-digit increase in comparable sales, for both the first quarter and year, but didn’t specify. Walmart U.S. sees comp sales for the year increasing at least 2 percent and Penney’s sees comparable sales flat to 2 percent ahead.

Retail ordering continues to be tight, according to three vendors contacted last week. “Even after the good news from last Christmas, scar tissue from seasons before still feels fresh. People were so shell-shocked,” said one brand leader. Retailers increasingly will be “chasing” reorders based on what’s selling best, to reduce the risk of overbuying before the season. “The consumer is more demanding than ever and brands and retail companies are reacting as quickly as they can,” said the vendor. “It’s not just business as usual.” However, “if certain sweaters are selling really well, you may not necessarily be able to reorder the particular style you want,” said the vendor. “It may no longer exist…If you think business is that much better, you would think the buying would increase.”

“I do feel the consumer is more ready to spend some money. They have held back. The problem is Millennials and Gen Z don’t want to own much of anything,” said retail analyst Walter Loeb. “Slowly but surely, retailing is maintaining a steady pace, though some companies are still overstored. Business will stay fairly even. I don’t think there will be many disappointments in sales through this year. But there’s not a rapid pace. Inventories are tightly controlled, retailers are in less trouble with that and can bring out new merchandise more frequently.”

The nation’s unemployment rate is expected to dip under 4 percent this year, which would help retail. But in March, the unemployment rate was 4.1 percent for the sixth consecutive month, and the number of unemployed persons, at 6.6 million, changed little, according to the Department of Labor. Retail employment also changed little in March — it was down 4,000 jobs, after increasing by 47,000 in February. In March, employment in general merchandise stores declined by 13,000, offsetting a gain of the same size in February.

Among Loeb’s picks for 2018 retail winners, he said T.J. Maxx remains in a good position because of its value quotient, while Macy’s is making some innovative moves yet still has “a long way to go.” He sees Walmart trying to attract younger shoppers, making headway against Amazon and demonstrating that a juggernaut can be nimble, and Nordstrom with new in-store shop concepts and brand associations continues as an industry leader. Costco, he added, last year made strides embracing the Internet, and Loeb is upbeat about the Ulta and Sephora beauty chains as having no problem drawing traffic.

Nevertheless, Loeb and other retail experts are concerned about there still being “too much stuff” and too many stores stifling shoppers, and not enough product innovation. “I must point out that I am concerned about too much debt,” Loeb said, citing several major retailers including J.C. Penney and the Neiman Marcus Group. “That means they can’t always do what they should be doing.”

Key trends for 2018:
* Shrinking store counts and downsizing existing units.
* Conservative inventory planning, chasing reorders.
* Focus on technology for better service.
* Greater consistency in shopping patterns.
* Continued double-digit digital growth.

Key concerns:
* Not enough product innovation.
* Still too much stuff out there.
* Heavy debt loads.
* New China tariffs raising consumer prices.
* Amazon threat real — though less lethal than once thought.

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