NEW YORK – American shoppers went into hiding in September, sticking to buying the bare-bone essentials and leading many retailers to report dismal sales for the month as skittish consumers grappled with the financial meltdown spreading around the globe.
The weak reports on Wednesday – an alarming gauge of consumer behavior since the meltdown began midway through last month – are fueling more worries about the holiday season and the overall economy, since consumer spending accounts for two-thirds of all economic activity.
Given the sharp falloff in sales and customer traffic, many retailers, including J.C. Penney Co., Kohl’s Corp., Saks Inc. and Nordstrom Inc. cut their outlooks as they use aggressive discounts to pull in shell-shocked shoppers.
“Discretionary spending has come to a trickle,” said Ken Perkins, president of research company RetailMetrics LLC. “Consumers are the most worried I have seen since at least the 1991 recession. There are so many factors laying on their psyche.”
He added that even discounters are going to have a “tough go” this holiday season. Indeed, September results showed discounters weren’t immune to shoppers’ mounting worries about their financial security.
Wal-Mart Stores Inc., the world’s largest retailer, and wholesale club operator Costco Wholesale Corp. both reported solid sales, but results were a bit shy of Wall Street estimates. Target Corp. reported a bigger-than-expected drop and said it expects problems with its credit card business to last through the rest of the year as customers have trouble making payments.
Luxury stores such as Neiman Marcus Group Inc. and Saks Inc., which had seen a sales slowdown, suffered sharp drops as well-heeled shoppers cut back on $600 stilettos and other luxuries. Many mall-based apparel stores and department stores including J.C. Penney Co. and American Eagle Outfitters Inc. found themselves mired in a deep sales slump.
According to the International Council of Shopping Centers’ preliminary tally, September sales rose 1.7 percent, well below the modest 2.3 percent average growth since the beginning of the retail industry’s fiscal year in February.
The tally is based on same-store sales or sales at stores opened at least a year. The final tally will be available Thursday to reflect results still to come from retailers such as Gap Inc. and TJX Cos. Inc.
Analysts are worried that spending could deteriorate even more as the problems on Wall Street further filter through the economy, with layoffs expected to rise in the coming months and the credit markets remaining frozen.
That means consumers are having a hard time getting loans and credit lines.
That’s adding to more stress for shoppers, who were already contending with high gas and food prices and a slumping home market.