Retailers, consumers and prices
Check out the expected higher use of cash and debit cards this holiday shopping season by debt-weary American consumers.
Credit cards are losing their appeal as 28.3 percent of U.S. shoppers said they plan to use that method of payment most often this holiday season, down from 31.5 percent last year, according to a survey by the National Retail Federation and BIGresearch.
Meanwhile, those intending to use cash most often rose to 24.9 percent from 22.8 percent last year, while debit card/check card use increased 1 percentage point to 42.5 percent, according to the survey.
“With many holiday shoppers focused on spending within their limits, it’s no surprise that fewer people will be relying on credit cards this year,” NRF CEO Tracy Mullin said in a statement.
Check out the expected June sales declines at U.S. retailers.
Cooler and wetter weather made things tough for companies, especially those selling summer products in the first three weeks. Overall same-store sales for the month are expected to be down 4.8 percent, according to Thomson Reuters.
“The consumer is still up against too many hurdles to be spending too much money,” Storehouse Partners retail analyst Patricia Edwards said.
McDonald’s and credit card company Visa are extending a hand to employees to help them figure out their personal finances in a deepening recession. The two have launched a free online money management course for workers at the hamburger chain’s 14,000 U.S. restaurants.
“Now more than ever, it is crucial that people have the financial tools they need to spend responsibly and this collaborative effort is a critical part of addressing America’s financial illiteracy epidemic,” the companies said in a statement.
Discount retailer Target Corp rang up its fifth consecutive lower quarterly profit, suspended almost all of its share buyback program and cut capital spending plans as cash-strapped consumers shifted away from its trendy merchandise to staples like food and toiletries.
Meanwhile, Lowe’s Companies, the No. 2 home improvement retailer, posted a lower profit, but even worse cut its fourth-quarter profit forecast below Wall Street’s expectations, citing rising unemployment, falling home prices and tight credit as reasons homeowners are putting off some renovations and purchases.
Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.
Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.
Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.
But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive.
Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.
Wonder how a half-point jump in the unemployment number plays into that?
Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.
Also in the basket:
New Wal-Mart director may herald changing of the guard (Wall Street Journal, subscription required)
Target grows makeup artist brands, adds testers (WWD)
In April, 24.5 percent of American consumers postponed a major purchase — an item of $500 or more – citing worries over higher gas prices, job security, credit card debt and the wait for a tax refund, according to a survey conducted by America’s Research Group.
That’s a big shift from a year ago, when almost 23 percent delayed a major purchase, saying they “did not want to spend the money right now.”
According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.
This year, that tax refund check likely means another sobering trip to the grocery store or gas station.