Lockdowns slam retail sales
16.4% drop in April sets dire record
BALTIMORE — U.S. retail sales tumbled by a record 16.4% from March to April as business shutdowns caused by the coronavirus kept shoppers away, threatened the viability of stores across the country and further weighed down a sinking economy.
The Commerce Department’s report Friday on retail purchases showed a sector that has collapsed so fast that sales over the past 12 months are down a crippling 21.6%. The severity of the decline is unrivaled for retail figures that date to 1992. The monthly decline in April nearly doubled the previous record drop of 8.3% — set just one month earlier.
“It’s like a hurricane came and leveled the entire economy, and now we’re trying to get it back up and running,” said Joshua Shapiro, chief U.S. economist for
the consultancy Maria Fiorini Ramirez.
“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 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, even as states and municipalities begin allowing businesses to reopen. More than 20 million Americans abruptly lost their jobs in April, sending the U.S. unemployment rate soaring to 14.7%, the highest level since the Great Depression.
The sharpest declines from March to April were at clothing, electronics and furniture stores. A long-standing migration of consumers toward online purchases is accelerating, with that segment posting a 8.4% monthly gain. Measured year over year, online sales surged 21.6%.
Other than online, not a single retail category was spared in April. Auto dealers suffered a monthly drop of 13%. Furniture stores absorbed a 59% plunge. Electronics and appliance stores were down over 60%. Retailers that sell building materials posted a drop of roughly 3%. After panic buying in March, grocery sales fell 13%.
Clothing-store sales tumbled 79%, department stores 29%. Restaurants, some of which are already starting to close permanently, endured a nearly 30% decline despite shifting aggressively to takeout and delivery orders.
For a retail sector that had already been reeling, a back-toback free fall in spending poses a grave risk. Department stores, restaurants and auto dealerships are in danger Retailers are being imperiled not only by business shutdowns mandated by states and localities but also by a record loss of 36 million jobs over the past two months. The layoffs and reduced hours have encouraged a pullback in spending.
Lindsay Fulton, a 29-yearold from suburban Richmond, Va., who was furloughed from her sales job at the end of March, said most of what little shopping she does now is online. She has no plans anytime soon to browse stores or simply shop for fun.
“I feel like, across the board, everyone’s habits have changed,” she said.
Dillard’s Inc. sales plummeted in the first quarter when most of its stores were closed because of the coronavirus pandemic. The department-store chain Thursday reported a net loss of $162 million for the quarter that ended May 2, compared with profit of $78.6 million in the same period last year. The company said in its report that it expects to operate at a net loss for the fiscal year.
In the past two weeks, J.Crew, Neiman Marcus and Stage Stores have filed for bankruptcy protection.
J.C. Penney filed for Chapter 11 bankruptcy on Friday. As part of its reorganization, the 118-year-old company said it will be closing some of its stores and will disclose details and timing in the coming weeks.
It operates 850 stores and it has nearly 90,000 workers.
UBS estimates that roughly 100,000 stores could shutter over the next five years.
“The whole economic model is unraveling,” Neil Saunders, managing director of GlobalData Retail. “This is going to be very painful. For some, it’s going to be fatal.”
April could prove to be the bottom for sales. The March figures were helped in part by panic buying and stores were generally open for the first half of the month. Most states have begun to lift barriers to commerce and movement, and many economists expect spending to rise this month as people venture out.
But in contrast to the nearly vertical drop, any rebound is likely to be gradual. Even as businesses reopen, there is no guarantee that customers will return in numbers previously seen.
“It’s probably fair to say the worst is over in terms of a collapse, unless there are waves of new outbreaks,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But how fast does it come back? The short answer is none of us really know.”
The Federal Reserve said Friday that Wall Street remains vulnerable to another shock if the global pandemic takes an “unexpected course” putting renewed strains on the economy and the country’s financial system.
The central bank said the financial system came under severe pressure in March as the pandemic shut down much of the economy and sent markets plummeting.
“Asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse or financial system strains re-emerge,” the Fed said.
The Fed’s assessment of the virus’ impact on the financial system came in a twice-a-year “Financial Stability Report” that the central bank issues to assess vulnerabilities in the financial system.
The report also noted that corporate debt had risen to historically high levels even before the coronavirus hit the United States. The sharp economic contraction will make it harder for businesses and individuals to meet their loan obligations.
Retail sales account for roughly half of all consumer spending, which fuels about 70% of total economic activity. The rest of consumer spending includes services like cellphone and internet contracts, gym memberships and child care.
The pressures being exerted on retail are also being felt globally. Among the European countries that share the euro currency, retail sales fell a painful 11.2% from February to March.
Spending tracked by Opportunity Insights suggests that consumer spending might have bottomed out around midApril before beginning to tick up slightly, at least in the clothing and general merchandise categories. But spending on transportation, restaurants, hotels and arts and entertainment remains severely depressed.
Even with the sales declines, the pandemic is forcing shifts in what people buy as they adjust to working at home. Sales of baking flour, tomato sauces, ice cream, premixed cocktails and breakfast sausages have surged from a year ago.
Pajama-buying rocketed 143% from March to April, according to Adobe Analytics, which monitors online retailers. By contrast, sales of pants, jackets and bras have declined.
Cody Pipper, a sales associate for a 16-store chain called Litehouse Pools and Spas, says he’s noticed that more people are now spending in ways that serve their at-home lifestyles. Pipper, 24, of Elyria, Ohio, said he spent $2,500 for a Peloton exercise bike for his wife, a medical assistant who recently returned to work. He said they expect to spend less on dining out and shopping at the mall.
“I’ve had a really good time with the family hanging out, watching TV,” said Pipper, who has a 1-year-old son. “I think this is the norm. This is what we are supposed to do now.”
Information for this article was contributed by Josh Boak, Anne D’Innocenzio, Sarah Rankin and Martin Crutsinger of The Associated Press; by Ben Casselman and Sapna Maheshwari of The New York Times; and by Rachel Siegel and Abha Bhattarai of The Washington Post.