What's Going On With US Consumers: Store Traffic Plunges 8% Into July 4th Weekend

First it was auto the auto parts suppliers getting hammered after O'Reilly Auto announced unexpectedly poor results (duly blamed on "mild weather" and weaker than expected Hispanic spending) and tumbling the most in 5 years, and then it was the retail REITs turn, after channel checks at Prodco Retail Traffic Analytics revealed that the US consumer continued to hibernate into the July 4th weekend with North American store traffic 8.1% lower in the week leading up to the July 4 holiday weekend, a steeper drop than the year-to-date trend of down "only" 6.6%. In the week ending July 1, with footfall at luxury retailers down 9.7%, and 8.3% weaker at apparel stores, Bloomberg reported.

The justifications for the abysmal results were legion: retail 2Q sales results may be impaired by weak traffic, as consumers still prefer digital, and they swap shopping for travel, dining out, or outdoor recreation. Shopping less in-store continues to hurt retailers' ability to prompt unplanned purchases.

The companies impacted the most included retailers such as Abercrombie & Fitch, Macy's, J.C. Penney, Tailored Brands and Nordstrom reported declines in traffic and same-store sales. And since they're among the tenants of REITs Kimco and General Growth, the the S&P 1500 retail REITs index fell as much as 2.8%, the most intraday in two months, with all 24 members declining: KIM is the worst performer, down as much as 5.6%; while other laggards include PEI, CDR, WRI, CBL, GGP, KRG, SKT, SPG, and MAC

Based on the above, it appears that 2Q retail sales will once again be hurt by overall weak spending even as Amazon continues to wreak havoc among the traditional retail sector. Abercrombie & Fitch, Macy’s, J.C. Penney, Tailored Brands and Nordstrom all reported declines in traffic and same-store sales.

And while many would be first to blame the (near) monopolistic dominance of Amazon in the online retail space, reading between the lines confirms that US households are aggressively shrinking their overall spending basket, as store checks by Retail Metrics throughout the month found continued soft traffic, although the May retail deterioration appears to have stabilized at a low level. This, despite elevated promotional levels at both specialty apparel retailers, and department stores,

Bloomberg adds that while June is typically a quiet month as chain stores transition from summer apparel and seasonal selling to clearance in order to make way for early fall and back-to-school merchandise, June has been extremely eventful month with additional store closures, bankruptcy filings, layoffs, acquisitions, management changes and exploration of strategic alternatives as retail industry undergoes a "broad-based transformation."

Finally, here are some sellside views:

Wells Fargo:

  • June store traffic decreased 4.7%, a modest improvement from -5.1% in May, according to same-store data from ShopperTrak.
  • First 4 weeks of June each showed sequential improvement in traffic; however, week 5 fell 7.1%, which dragged down monthly traffic by almost a full point
  • Pricing remained under pressure in June, based on Wells Fargo channel work

Bloomberg Intelligence:

  • Retail 2Q sales results may be impaired by weak traffic, as consumers still prefer digital, and they swap shopping for travel, dining out or outdoor recreation
  • Shopping less in-store continues to hurt retailers’ ability to prompt unplanned purchases
  • In the week ending July 1, footfall at luxury retailers was down 9.7%, 8.3% weaker at apparel stores

Based on the just released FOMC minutes, none of this figured in the Fed's deliberations on when to hike rates next, and when to begin balance sheet normalization.

Comments

Manthong El Vaquero Wed, 07/05/2017 - 15:48 Permalink

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 Consumers are confidently staying home. Some have invested in fireworks. Retailers are confidently folding and malls/storefronts are confidently shuttering. All the vacant retail space is testimony to the confidence men in banking and finance.

In reply to by El Vaquero

Yog Soggoth Manthong Wed, 07/05/2017 - 21:57 Permalink

Don't try to look this up online as search engines have turned Fake, but the Chinese were instrumental in helping prior to 1776. Not only Gold specie, but high quality salt petar and black powder sometimes on Russian whaling ships. You might still hear rumors of West Indies blathering, like they made a lot of gunpowder on Spanish headchopper island in the worst of temperature/humidity with no factory. Repayment is why we started buying the Chinese fireworks in the first place. It was a loan. I think we have paid them back by now.

In reply to by Manthong

El Vaquero Postal Wed, 07/05/2017 - 17:02 Permalink

Yeah, I've heard the stories about them being agressive.  I'd have to steal a government vehicle to do that though, and we all know how the government feels about us stealing from it rather than the other way around.  Fortunately, every time they see me, they either stare, or run like they don't want to get shot.  

In reply to by Postal

El Vaquero Akzed Wed, 07/05/2017 - 18:15 Permalink

I've never tasted any of the others, so I'll take your word for it.  The one that my buddy shot yesterday was the first large animal that I've had to help take care of in the middle of July in a desert with no trees.  Most hunts for large animals here occur on Sept-Dec, and I have to say, fall and winter do make taking care of them in the field a lot easier.  You also run yourself ragged on these damned summer hunts.  Legal shooting hours are ~5:30AM-~8:45PM, and with offrange Oryx, you're hunting during as much of the legal hours as is possible if you really want the best chance of getting one.

In reply to by Akzed

inhibi GUS100CORRINA Wed, 07/05/2017 - 16:50 Permalink

Oh its worse than just credit card debt:- Mortgage/AKA 'house credit line" tapped out- College debt (parents or students, doesnt matter, both are fucked)- Subprime auto-loans/perpetual leasing- Insurance premiums up ~50 to 200% depending- Produce more expensive ~ 5% up from last year on avg- Wages stale- 401k/pensions plunderedWelcome to the new normal: it aint normal except for the 1%.Also, we all know that these "analytics" are always edging for the good news, so in actuality, I bet this "6.6% down" is more like "15%" down without all the BS manipulation they add to "re-calculate" the data. For example, I bet they take out all the stores that closed, i.e. 0% store traffic.

In reply to by GUS100CORRINA

swmnguy GUS100CORRINA Wed, 07/05/2017 - 19:01 Permalink

That's what I would have thought, too.But now I've been enlightened.  It's all the fault of the whiny snowflake Millennials who live in their parents' basement safe-spaces and simply refuse to work, get married, have children, buy houses and cars, build their credit profile, etc.I've been very relieved to hear it's their fault.  For a while there, I was getting concerned that maybe our version of corporate finance capitalism was slamming into the wall of running a debt-based finance system with fiat money.  That would have been disconcerting to say the least, as Karl Marx, of all people, predicted the life-cycle of such a system.  While what Marx predicted was eerily similar to what we see all around us today, and he appears to be the only economist who has correctly predicted how this would go, we all know he was a terrible political philosopher, so we have to ignore all his economics work.  That leaves us Krugman, more or less, or worse still the Austrians, so I'm awfully glad to have the Millennials to blame for all this.

In reply to by GUS100CORRINA

Rubicon727 BLOTTO Wed, 07/05/2017 - 16:58 Permalink

"Be careful - Amazon is a black hole getting bigger and going to eat up everything in site..It might even wipe out Walmart before the masses get the chance to loot it when we are running on the streets."The level of ignorance in America never fails to amaze. I was in Safeway today, and asked the (30 yr old) cashier if her Safeway bosses had messaged that Jeff Bezos of Amazon had bought out Whole Foods."To whit, she said, " I never heard that. Who's the Amazon boss?"She needed more coaxing: "Jeff Bezos, and he's going to automate the entire grocery shopping in his control so you're job isn't going to be around for much longer."To whit, she said "Well, I'll be gone by then." (Meaning, Bezos is going to take 30 years to fully automate shopping with other corporate clowns in Safeway, etc. following not far behind.)Never mind. She and  several million others of her ilk will simply pay the price for their total ignorance.

In reply to by BLOTTO

Antifaschistische Erek Wed, 07/05/2017 - 16:02 Permalink

I take another angle..It's hot in Houston.  Sears used to be a great place to go for a garage fan.  How about, just a traditional box fan.....I need an extra one last weekend.   Sears had NOTHING.  NOTHING!!!   I wanted a good Dayton shop fan....Zoro had it and they almost always ship the same day.   Sears has STRIPPED their shelves.   I bought a couple of nice metal sawhorses from Sears a few years ago since they're 2 minutes from my house...I go back to get a couple more.  NOTHING other than the cheap plastic crap.  I just KEEP giving Sears first right of blowing my money....and they keep failling to deliver.  I do NOT blame Amazon for this.  I could tell 50 identical stories but you'd all get bored.

In reply to by Erek

sirsmokum (not verified) Antifaschistische Wed, 07/05/2017 - 16:47 Permalink

Dude you go to harbor freight for something like this now.  When everyone is importing cheap crap from china you go to the people who are atleast honest about it.  Maybe switching from selling US made products to china made products also had something to do with all of this. Regardless, those box stores profits now belong to usps and fedex.

In reply to by Antifaschistische

pods knukles Wed, 07/05/2017 - 15:21 Permalink

I'm sure that many would like to dodge bullets to go and buy overpriced junk made with slave labor that they don't need but it was pretty hot out in places. And it probably rained too.Malls are dead.  They just don't offer the appeal that they used to.  Especially when you are broke.pods

In reply to by knukles