Why rout in retail shouldn’t worry US
Excluding auto dealers and gas stations, sales were up over the past three months
Afurious pace of store closings and bankruptcies has drummed up fears that US retail is collapsing. Not so fast: Many indicators suggest that retail employment is unlikely to shrivel and the economy will withstand any shock from the sector’s rout.
Granted, the industry’s current woes can’t be ignored. Retail sales account for almost half of consumer spending, which in turn makes up about 70 per cent of the economy. Retailers employ 15.9 million people, or about one in every 10 US workers, and positions at certain types of stores may become harder to find.
For starters, the broad trend in retail purchases is moving higher: Excluding auto dealers and gas stations, sales were up an annualised 4.6 per cent over the past three months. Even with recent job losses, retail headcount is close to its 12-month average. Such figures suggest the industry is hardly about to shrink or fade away.
Even with the “eye-catching headlines about store closings” and other recent struggles in retail, “we don’t see much of an effect on retail employment and therefore on consumer spending,” said Robert Sockin, an economist at UBS Securities LLC, which issued research last week titled Reports of Retail’s Death Have Been Greatly Exaggerated .
“As long as there’s demand for workers and the consumer stays healthy, that will keep the retail sector buoyant.”
It’s true that store closings are already outpacing those of 2008, when the US was in a deep recession, according to an April 6 report from Credit Suisse. About 2,880 announcements so far this year exceed the 1,153 over the same period of 2016, the investment bank said. Macy’s Inc, Sears Holdings Corp and J.C. Penney Co are shutting hundreds of locations combined, and shoe chain Payless Inc recently joined the list of retailers filing for bankruptcy.
Driving the doom and gloom are pockets of weakness such as department stores and clothing chains that are casualties in the battle between brick-andmortar and e-commerce. While that has led to consolidation and a shift of market share from traditional and mall-based locations to more agile online businesses, the latter’s share of total retail sales remains below 10 per cent.