Even discounters hurt by slowdown

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Wednesday, April 11, 2001, 12:00 a.m. Pacific

Even discounters hurt by slowdown

by Anne DInnocenzio The Associated Press DANNY JOHNSTON / AP An unidentified shopper walks the aisles at a Little Rock, Ark., Wal-Mart yesterday. Wal-Mart has said sales in March will probably fall. NEW YORK - Until earlier this year, Sue Crowgey, a 40-year-old mother of four, was a regular at the local restaurants and malls. But the slowing economy and volatile stock market have now scared her into staying at home.

"I rummage through my closets and ask myself, 'What do we actually need?' " said the Sanford, N.C. resident. "I've given up eating out, and now eat macaroni and cheese and frozen pizza.

"I'm nervous," Crowgey added. "My (investments) are dwindling, and my oldest child is going away to college."

Crowgey, who's been spending $300 less per month, has joined a wave of consumers who are either pulling back even more or just starting to cut back on frivolous purchases.

Less discretionary spending

The financial markets' downturn and the rash of company layoffs are hurting consumers' willingness to spend on discretionary items. And that's causing more migraines for retailers, which are grappling with a consumer spending funk that's continuing into spring.

Even discounters are getting bruised.

Wal-Mart Stores, the world's largest retailer, has said last month's same-store sales - sales at stores open at least one year - may fall below the company's projected 3 to 5 percent increase.

Additionally, Target, which operates Mervyn's, Target Stores and Marshall Field's, said it may miss its sales increases. Kmart also sees March sales falling below expectations.

Most retailers will report their March sales tomorrow.

"This is going to be a very dismal year for retailing," Carl Steidtmann, chief economist at PriceWaterhouseCoopers.

Still, not everyone is getting pummeled by the souring economy.

Teen market strong

Teen retailers such as Hot Topics and Pacific Sunwear of California continue to generate robust results, while drugstore powerhouses Walgreen and CVS recently reported strong earnings. Drugstores fare better in slowdowns, since historically more people tend to get sick.

C. Britt Beemer, chairman of America's Research Group, a Charleston, S.C., market-research firm, said those in the middle- to upper-middle-income class are feeling the biggest burden on several fronts: massive corporate layoffs; high gas prices; and the plummeting financial market, which has deflated consumers' 401ks and eroded their confidence.

The lowest-income consumers, who typically don't own stocks, are getting hit hard by rising utility bills, he added.

Kurt Barnard, publisher of Barnard's Retail Trend Report, points out that consumers' high levels of debt with low levels of savings is also worrisome.

"They are very vulnerable to any economic downturns and any possibility of job loss," he said.

http://seattletimes.nwsource.com/cgi-bin/WebObjects/SeattleTimes.woa/wa/gotoArticle?zsection_id=268448455&text_only=0&slug=retail11&document_id=134283341

-- Carl Jenkins (somewherepress@aol.com), April 11, 2001


Moderation questions? read the FAQ