Economy Isn’t Kind To Retailers

So the U.S. economy is the strongest it’s been in years. But consumers aren’t celebrating by shopping, and many of the nation’s retailers are watching the boom times pass them by.

Montgomery Ward & Co.’s decision Monday to file for Bankruptcy Court protection reflects the tough climate for many merchants who can’t get shoppers to buy even if unemployment is low and inflation is stable.

Ward won a bankruptcy judge’s approval for $300 million in interim financing Tuesday so it can restock its shelves, pay employees and satisfy creditors through July.

Part of U.S. retailers’ problem is that consumers have more important financial priorities than shopping - there are college tuition and retirement to be funded. But the retailers also have themselves to blame.

“It doesn’t matter that the economy is good - there’s nothing drawing shoppers into stores,” said Kurt Barnard, a retail consultant and president of Barnard’s Retail Marketing Report.

Since the early 1990s, Montgomery Ward, the nation’s largest privately owned retailer, has failed to meet changing consumer demands: It hasn’t offered shoppers the brand-name goods they want, nor has the company given them good enough service.

And while Ward lagged, sharper competitors including Sears, Roebuck and Co., Wal-Mart Stores Inc. and electronics retailers Circuit City and Best Buy stole its market share. The Chicago-based Ward never kept up, and is now struggling $1.4 billion in debts.

Ward has suffered even during good economic times, when consumers traditionally are eager to buy. And it’s had company - in recent months, tough competition forced electronics retailer Incredible Universe to close. Nobody Beats the Wiz, another electronics chain, said it would shutter five of its 63 stores.

Business is sluggish at clothing stores as well. Uninspiring merchandise and dated store layouts have depressed sales at Gap Inc., Limited Inc. and Dayton Hudson Corp.’s Mervyn’s stores.

“It takes more to get people to buy than just say that you’re selling something,” Barnard said.

And now, consumers are savers more than spenders. Money that used to go for a new shirt or VCR is now put toward paying off big credit-card debts or saving for retirement or college education.

“Consumers aren’t spending like they used to. For one, they are now looking at their investments with the same criteria as their home mortgage - they must contribute every month,” said Britt Beemer, chairman for America’s Research Group, a market research firm. “Retailers then get what is left over, which isn’t too much.”