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May 15 2020

Consumer Society

Or maybe not so much. In March and April the bottom dropped out of Retail.

Retail sales plunged 16.4 percent in April as coronavirus pandemic drives record decline
By Rachel Siegel and Abha Bhattarai, Washington Post
May 15, 2020

Retail sales plunged 16.4 percent in April, by far the biggest drop on record and another reflection of how severely the coronavirus pandemic continues to devastate the U.S. economy.

Data released Friday from the Commerce Department were lower than analysts had expected and were nearly double March’s revised decline of 8.3 percent. Spending at restaurants and bars fell by about half from a year ago, while clothing store sales were down 89 percent in the same period.

Consumers also pulled back on electronics, appliances, furniture and gasoline, and analysts say it could be years before spending inches back up to pre-pandemic levels.

“You’ve got the financial cloud over everybody’s head saying, ‘Hmm, do I really need this?,’” said Wendy Liebmann, chief executive of WSL Strategy Retail, a New York-based consultancy. “This double-barreled convergence of health and financial crises is going to keep people very cautious for the long haul.”

A rebound, she said, would be gradual. More than 20 million American abruptly lost their jobs in April, sending the national unemployment rate soaring to 14.7 percent, the highest level since the Great Depression.

Consumer spending, which typically drives 70 percent of the nation’s economy, remains largely hollowed out as Americans pull back on virtually every category of goods. The two exceptions were grocery stores, where sales rose 13 percent from a year ago, and online sales, which grew about 21 percent.

A growing number of states contend that easing restrictions on malls, restaurants, salons and other businesses is essential to rebooting the economy, even as health officials warn about the deadly threat of moving too quickly.

The pandemic has ushered in a wave of retail bankruptcies, with major chains like J. Crew and Neiman Marcus filing for Chapter 11 protection in recent weeks. Stage Stores — which operates 738 stores in 42 states under Palais Royal, Gordmans and other nameplates — said Monday it will liquidate hundreds of locations and search for a buyer.

“The destruction of retailers, both large and small, has been discussed for weeks but to see the actual impact on the sector is jaw dropping,” Mike Loewengart, managing director of investment strategy at E-Trade said in a note to clients.

Analysts said the list of retailers fighting for survival will only grow. Closures could have disproportionate effects on lower- and mid-tier shopping malls that faced uncertain futures even before the pandemic. For years, Americans shifted their shopping habits away from brick-and-mortar stores to embrace e-commerce offerings. Now, buying online if often the only — or safest — option.

Sung Won Sohn, professor of finance and economics at Loyola Marymount University, said that even as the economy gradually reopens in May, other factors could continue to thwart retail sales. Scores of laid off workers will not return to their jobs anytime soon. Many of the worst-hit industries, like airlines, hotels and theaters, will have to slash capacity to uphold social distancing guidelines and swallow the sales cost.

“There will be massive bankruptcies of small businesses, a large source of jobs in America,” Sohn said. “The behavioral response from the shellshocked consumers is to hunker down and save as much as they can lest the situation gets worse.”

I suggest you go long on Equities. Bet the Farm Clavin.

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