Walmart Thrives On Candy And Costumes
MADELEINE BRAND, host:
From NPR News, this is Day to Day. To economic news now. The nation's major retailers are reporting today their weakest October sales in at least 40 years, bad news for the holiday shopping season. That is, unless you're Wal-Mart. The retail giant is the sector's sole bright spot. Marketplace's Sam Eaton is here now, and, Sam, I can assume why Wal-Mart is doing so well is because people don't have a lot of money to spend, right?
SAM EATON: Sure, Madeleine. There's that old Wal-Mart slogan, low, low prices. That's now resonating with the nation's shell-shocked consumers. So, as even Target and Costco post worse-than-expected sales declines, Wal-Mart is reporting a nearly two-and-a-half-percent bump. Now, part of that is due to the fact that Wal-Mart, unlike Target, sells a lot more of those essential items like food.
But Paul Nolte, a retail analyst with Hinsdale Associates, I talked to says there's a bigger trend at play here. And it's likely to end with a major shake out in the retail sector, especially as we head into the holiday shopping season.
Mr. PAUL NOLTE (Director of Investments, Hinsdale Associates): The lower price retailers, the Wal-Marts, Dollar Trees, and so on should do OK versus more upscale retailing, as the consumers kind of move down, as it were, in the pricing scale and the retailers that they're going to go visit.
BRAND: So, Sam, Wal-Mart is doing fine. Who is not? Who's being hit the hardest?
EATON: Well, Madeleine, just slide that pricing scale in the other direction, and you get an idea. Luxury retailers are being pummeled - Nordstrom and Sachs posted drops in same-store sales today in the 16-percent range, far worse than any analyst expected. This is a strong signal that America's wealthiest consumers may be cutting back the most, or at least foregoing designer brands for Wal-Mart specials. And even teens are paring back. Abercrombie & Fitch posted a 20-percent drop in sales.
And it's easy to see how this has all happened. Plummeting retirement accounts and home values, not to mention layoffs has driven consumer confidence to its lowest levels since record keeping began back in 1967.
BRAND: OK. So that's not very good news for retailers as we head into the shopping season, the holiday shopping season. Any hope at all for them on the horizon?
EATON: Well, most of the experts I talked to are predicting a long and dark winter, especially for non-essential items like clothing and electronics. And that includes holiday gift giving. The latest research shows more than half of U.S. households plan on cutting back their holiday spending this year.
There was some hope that cheap gas would provide a much-needed boost by putting as much as $35 billion back in consumers' pockets, but it looks like that would only help on the margins, even under a best-case scenario.
And with economists now saying the U.S. could be entering its worst recession since the 1970s, consumers are more likely to hold onto any savings they gain on gas. In fact, many may even forego driving altogether, heading to online retailers for their holiday shopping, using the Internet as a way to find the lowest prices.
BRAND: Thanks, Sam. That's Sam Eaton of public radio's daily business show, Marketplace.