Gloomy Days Ahead for Retailers
Congress probably wasn’t thinking about food last winter when it voted to send stimulus checks to 130 million U.S. households. President George W. Bush and other leaders hoped the package, amounting to more than $100 billion, would grease the wheels for broad consumer spending, thus lessening the severity of housing’s collapse. “The growth package has to be big enough to make a difference in an economy as large and dynamic as ours,” Bush said.
As the checks got cashed and consumer prices surged, however, large numbers of Americans spent the money in May and June on such basic needs as food, utilities, and gasoline. Sales at nearly all retailers—save for those selling low-cost food—were dismal. And that’s proving to be a source of deep worry for a broad array of retailers of everything from electronics and autos to home furnishings. “There are already too many building material suppliers than there are buyers, and auto dealers who have their parking lots full of SUVs they can’t sell,” says Brian Bethune, chief U.S. financial economist at Global Insight, a market analysis firm.
The bulk of the money, which started going out in May, has been disbursed, with the last checks already in the mail. Since May 1, the Treasury has pumped out $78 billion as tax rebates and transfers. But U.S. retail sales rose a mere 0.1% in June, after a 0.8% jump in May caused by the stimulus checks, according to the Commerce Dept. Specialty retail and department stores reported dismal sales: Limited Brands’ (LTD) sales fell 9% in June and 6% in May, J.C. Penney’s (JCP) fell 2.4% and 4.4%, while Abercrombie & Fitch’s (ANF) sales declined 3% and 1%, respectively.
