That $150 billion in government checks stanched the bleeding in May and June, but July retail sales show that shoppers are now holding on to what cash they have. "They're spent out and this is causing a problem at retail," retail consultant Howard Davidowitz told NPR's Morning Edition.
The winners: Discounters like T.J. Maxx (same-store sales up 3 percent), Costco (up 6 percent, net of fuel sales), and Wal-Mart (up 3 percent, net of fuel sales) continue to lead the pack. "The cheaper the better," Davidowitz said. "Look at Family Dollar (up 4.6 percent) doing well. Look at Dollar Tree doing well."
"With the end of the stimulus checks, we know consumers are spending more cautiously, and we continue to see a pronounced paycheck cycle at the end of the month," said Wal-Mart's Eduardo Castro-Wright, head of U.S. operations. "We also continue to see improvement in our customer traffic, relative to last year." Grocery, entertainment, and HABA were the strongest categories. Maybe some of those shoppers came from Target, which continues to show disappointing sales, off 1.2 percent in July.
Teen apparel stores were the two top performers on the Wall Street Journal's handy retail sales chart, with Buckle posting a 20.9 percent same-store sales gain and Aeropostale up 13 percent in July. But the strength didn't extend across the board, with Abercrombie and American Eagle both down 7 percent.
Smart retailers such as Starbucks have revised their offerings to reflect this new reality. Starbucks instituted $2 drinks in the afternoon after losing market share to Dunkin' Donuts and McDonald's. Whole Foods Market (which just reported a terrible quarter, with net sales off 31 percent) has stepped up promotion for its "everyday value" items and instituted store tours to show shoppers how to eat healthy for less.
The losers: Most of us. "The living standards of Americans are going to go down for the next 20 years," Davidowitz said. "This is a permanent condition we have."
Summer clearance sales pushed down sales and no doubt hurt margins at Kohl's (down 10.4 percent) and Old Navy (down 16 percent).
Malls and shopping centers are hurting, Davidowitz noted, as anchors such as Macy's and Home Depot close stores and shoppers elect not to burn the gas to drive to a regional center for some retail therapy. "Urban is now more popular than suburban," he notes, as Walgreen and CVS are "doing OK because they're closer to the consumer."
The Journal's Kevin Kingsbury notes that analysts were curious to see the result of "moderating prices at the gas pump." Unleaded in Denver went down a whole dime a gallon last week, to $3.89. Let's not kid ourselves.
The takeaway: Fasten your seat belts; we're in for a bumpy night. And Howard Davidowitz is fun to listen to even when he's delivering bad news.
Image: Family Dollar store in Rochester, N.Y. Photo by Mish Bradley via Flickr, CC 2.0.