The April reports show a 16.4% drop in retail sales, lower than the predicted rate of 12.3% for the month of April. This rate is nearly double the March rate of 8.3%. The drops were seen to a greater or lesser extent across retailers, even extending to grocery stores. Clothing and accessories were down 79% in April; electronics and appliances down 60.6%; furniture and home furnishings down 58.7%; gas stations down 28.8% and grocery stores reduced by 13.2%. The decline in grocery store purchases is attributed to the inference that people are buying more groceries in stores like Wal-Mart and Targets and/or Amazon in order to limit potential exposures to the virus. Sales of athleisure wear and comfort clothing have been robust though no firm data has been reported. The only area which saw an increase in sales was online businesses which gained 8.4% in sales.
The temporary shuttering of stores has led several retailers to file for chapter 11 bankruptcies. These include Neiman Marcus, J. C. Penney, and J Crew. They join a growing list of companies, over the past decade, which have moved to restructure by contracting their retail outlets and laying off staff to try to meet goals set in Chapter 11 planning. They join other retailers in chapter 11which include Toys “R” Us; Pier 1; Payless Shoesource; and Forever 21.
Although the pandemic was the catalyst for the most recent filings, it is not the only culprit in the devastation of formerly major retailers. Analysis suggests that the causes of the downturn in sales are also attributable to these companies’ inability to compete effectively with online options and to a tepid response to attracting younger customers to their client base. Another significant factor troubling retailers is the debt incurred by buyouts from private equity firms which have added payments in interest and fees to declining sales.
Sixty eight percent of the 21.5 trillion dollar US economy relies on personal consumption. What the future holds in these areas is difficult to predict. Experts suggest that the return to a “normal” pattern cannot be expected until 2021 but the question of whether there will even be a return to previous habits remains open. People may be more cautious about spending money but if long term trends in work change so that more people will work at home, part or full time, it is likely that the sale of clothing, gasoline, and automobiles may not return to previous levels. It is also unclear whether the chapter 11 goals for restructuring affected companies will be made or if they will suffer permanent closings and layoffs. When Toys “R” Us went into chapter 11, 30,000 workers were let go with no severance pay even though creditors, attorneys, and consultants were paid. If companies go into full bankruptcy more workers will lose their incomes and reverberations will be felt in consumption, home buying, and other related areas. Companies such as Amazon, Etsy, and Wayfair are making this possibility veer towards a probability. The US departments of Commerce and Consumer Protection will need to attend to these likely future trends.
https://www.ftc.gov/about-ftc/bureaus-offices/bureau-consumer-protection A federal agency collecting complaints and conducting investigations into fraudulent and unfair business practices.