American consumers went into hiding in September, leaving many retailers with dismal sales and an uncertain future well beyond the holiday season as the fallout from the financial meltdown pushes spending even lower.
As retailers reported their monthly sales figures Wednesday, even discounters weren’t immune to shoppers’ financial worries.
“Discretionary spending has come to a trickle,” said Ken Perkins, president of research company Retail Metrics LLC. “Consumers are the most worried I have seen since at least the 1991 recession. There are so many factors laying on their psyche.”
The pain may last, experts said.
“Usually if sales are weak for this time of year, it doesn’t bode well for holiday,” said Stephanie Hoff, an analyst at Edward Jones in St. Louis.
Wal-Mart Stores Inc., the world’s largest retailer, said sales of discretionary items were weak as it posted results that were a bit below expectations. Target Corp. fared far worse, reporting a bigger-than-expected drop and saying it expects problems with its credit card business to last through the rest of the year as customers have trouble making payments. It said third-quarter profit may be “slightly below” analysts’ estimate of 52 cents a share.
Luxury stores such as Neiman Marcus Group Inc. and Saks Inc. suffered sharp drops as well-heeled shoppers held off on buying luxuries. Many mall-based apparel stores and department stores including J.C. Penney Co. and American Eagle Outfitters Inc. found themselves mired in a deep sales slump.
With no clear spending recovery in sight, retailers are trying to decide how much to cut their spring orders and store expansions to address the dramatic changes in consumer behavior that many economists expect to persist at least until next year, if not longer.
“We rarely eat out, and even groceries have become a big-ticket item,” said Cincinnati resident Victoria Gentry, 41, a single mother of a daughter, 15, who now worries about her job at a bank’s merchant service division. “No more payday pizzas now.”
Before the financial meltdown began in mid-September, customers had already been switching to lower-price brands and stores, cutting back on essentials and making other changes such as mending their clothes instead of buying new ones.
Desperation has set in as the critical holiday season approaches. Merchants have begun cutting holiday orders in recent days, even as goods start to flow into stores, according to Arnold Cohen, co-founder of Mahoney Cohen and Co., an accounting firm for the apparel industry.
A slew of companies, including Penneys and Saks, cut their third-quarter outlooks Wednesday as they stepped up discounting to pull in shoppers.
