The US consumer is in full-scale retreat, retailers confirmed today, as dire sales figures confirmed a bleak outlook for the peak shopping season.
Major retailers such as Macy's, Abercrombie & Fitch and GAP reported sales declines of more than 10% in November. Retail figures are a bellwether for the US economy with consumer spending accounting for more than two-thirds of economic activity. Shops hoped that Black Friday, the day after Thanksgiving and traditionally the biggest shopping day of the year, would jump-start consumer outlay but industry experts were downbeat.
"The American consumer is a train wreck," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consultancy. "We don't know when it is going to get good but I think the worst is yet to come. The results are terrible and will continue to be terrible."
ShopperTrak, a retail monitoring firm, said total sales at US retailers rose 1% during the Black Friday weekend but analysts believe much of that gain will have been stoked by deep discounts and will hit profits. Black Friday earns it moniker from the fact that most retailers move into an annual profit in the month between Thanksgiving and Christmas.
A leading retail trade group said the decline in November sales hit every section of the industry, affecting performances at previously robust sectors such as bargain stores and drugs outlets. The International Council of Shopping Centers, which represents stores including GAP and JCPenney, said sales at 37 major retailers fell 2.7% over November – the worst start to the holiday season in 35 years - and is forecasting an overall dip of 1% in the final two months of the year.
Retailers said the late timing of the Thanksgiving holiday of this year had also dented November figures, with more sales pushed into December as a result. However, the ICSC said it added up to two percentage points to the sales decline, which still left sales in a deficit overall.
"We have never seen anything as weak as this. It is simply the recession and it is really taking its toll on consumer spending. And it is not just discretionary spending. It is across the board, with every segment showing a decline," said Michael Niemira, chief economist at the ICSC.
The best performer today was Wal-Mart, which beat expectations with a 3.4% sales rise at stores that had been open more than a year. The world's largest retailer added some gloss to the ICSC's figures. Without Wal-Mart's contribution, November sales would have fallen 7.7%.
The worst performers among individual retailers included Limited Brands, owner of the Victoria's Secret lingerie stores, which saw a 12% fall in like-for-like sales. Target, a close Wal-Mart competitor, posted a 10.4% decline and Abercrombie & Fitch, the clothing retailer, said sales fell 28% as it refused to join competitors in aggressive discounting.