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US retail sales drop

Updated August 19, 2013


Major US retailers posted reduced quarterly sales this week, pointing to the effect of falling wages and working hours on low income households.

Walmart, the world’s largest retailer, posted a 0.3 per cent fall at its US stores in the quarter ending July 26 and reduced its outlook for global sales this year.

“Our core customer is more in the low income area and...there’s not a lot of confidence right now in their incomes,” Charles Holley, Walmart’s chief financial officer, said in a conference call with analysts.

He added that there is “a general reluctance of customers to spend on discretionary items right now,” with consumers focusing on essentials like food, clothes, and home goods. “The consumer doesn’t quite have the discretionary income, or they’re hesitant to spend what they do have,” explaining low sales for items such as electronics and toys.

“When we do see good things in the economy, sometimes they don’t immediately flow through to a paycheck. Remember how the average American lives,” said C. Douglas McMillon, chief executive of Walmart International.

The announcement of Walmart’s sales figures followed similarly depressed figures from other retailers. Kohl’s, the discount clothing store, said Thursday its profits for the spring quarter fell 3.5 per cent. The company also downgraded its earnings forecast for the rest of the year, after sales grew less than expected.

The previous day, Macy’s, the US department store, said its sales fell 0.8 per cent in the most recent quarter, its first drop in same-store sales since 2009, leading the company to slash its annual profit forecast.

“We believe that much of our weakness is due to the health of the consumer,” said Karen Hoguet, the retailer’s chief financial officer, in a conference call with analysts. Macy’s CEO Terry Lundgren added that the low sales figures expressed “consumers’ continuing uncertainty about spending on discretionary items in the current economic environment.”

Commentators echoed the retailers’ claims that poor economic conditions for working people contributed to the reduced sales at low-end retailers. “This has been a tough recovery for folks who are their prime customer base,” Jared Bernstein, of Center on Budget and Policy Priorities, told the New York Times.

“If you look at statistics on whose paychecks are going up, you’ll see that it’s clearly an uneven recovery. In that sense, lower-end retailers are going to have a tougher time,” he added.

Retail executives said a two per cent increase in Social Security taxes at the beginning of the year contributed to sagging sales at stores such as Walmart and Kohl’s. Since Walmart customers are primarily low-income, the tax increase affects them disproportionately, while rising home values, a key component of official proclamations of economic ‘recovery,’ affect them less than other sections of the population.

“Even though the per cent is the same, losing money means more to you when you’re in the $25,000 range than when you’re in the $150,000 range,” Bernstein said. “For families who are scraping by, the loss is simply more painful.”

Social inequality also finds expression in the sales figures. Although the growth of sales at mid-to-high-end retailer Nordstrom did not meet analysts’ expectations, it still did far better than Walmart or Kohl’s, growing 4.4 per cent from a year ago, according to figures announced this week.

“There is a certain segment of the population that is faring well in this economy and have seen their net worth rise sharply with stock and housing market gains,” Ken Perkins, president of Retail Metrics, told the New York Times. He added, “Then there is the much larger segment of Americans who are working in low-wage jobs, part-time jobs, that are struggling to make ends meet and are living paycheck to paycheck. They are not spending beyond necessities.”

The Labour Department said last Wednesday that real average weekly earnings fell by 0.5 per cent over the course of the past month, as a result of falling hourly earnings and a reduction in the average work week.

Of the lackluster total of 162,000 jobs added in July, two thirds were part-time, and most were in low-wage sectors, according to the latest US jobs report, published earlier this month by the Labour Department.

Over the past six months, the growth of part-time jobs has been even more dramatic, with 97 per cent of new jobs created being part-time, according to Keith Hall, a senior researcher at George Mason University’s Mercatus Center.

Citing the Bureau of Labor Statistics’ Household Survey, Hall said that over the past six months, 963,000 more people reported that they were employed while 936,000 of them reported they were in part-time jobs.—Courtesy: WSWS