Analysis: Spending on cars, homes threatens apparel sales as holidays approach

Mon Aug 26, 2013 7:07am EDT
 
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By Jessica Wohl and Phil Wahba

(Reuters) - Even with consumer confidence at a six-year high, retailers ranging from Target Corp (TGT.N: Quote) to Macy's Inc (M.N: Quote) are competing not only with each other but are also having to adapt to shifting spending patterns.

Many consumers are taking advantage of still-low interest rates, purchasing cars and houses, but at the same time they are holding back on shirts, dresses and shoes, which doesn't bode well for many retailers in the run-up to the year-end holiday season.

"People are putting their money into things that will last," said Jill Puleri, IBM's global industry leader for retail. "If you look at appliances, if you look at jewelry, these are not necessarily small purchases. They're rewarding each other ... They're putting money where things are more stable."

IBM expects U.S. appliance sales to rise 6 percent in the current third quarter, with sales of other home goods up 1.67 percent. For the holiday season, it expects appliance sales to rise 2.13 percent and sales of home goods to rise 1.98 percent, while anticipating the steepest decline, 3.62 percent, in men's apparel.

That's good news for companies such as home improvement chains Home Depot Inc (HD.N: Quote) and Lowe's Cos Inc (LOW.N: Quote), which reported strong quarterly results and raised their fiscal year forecasts as people spruced up their homes.

In contrast, Macy's, Kohl's Corp (KSS.N: Quote), Wal-Mart Stores Inc (WMT.N: Quote), Target Corp (TGT.N: Quote) and even luxury chains such as Saks Inc SKS.N and Nordstrom Inc (JWN.N: Quote) posted disappointing second-quarter sales in recent weeks, and many aren't hopeful about the holidays.

"As people are spending more money on their cars and homes, they are cutting back elsewhere, such as their spending on items like clothes and shoes," Sears Holdings Corp (SHLD.O: Quote) Chairman and Chief Executive Edward Lampert told Reuters in an interview.

Macy's, which gets about 80 percent of sales from clothing, lowered its sales forecast for the year after it noticed spending shifting away from what department store chains offer.   Continued...

 
Shopping carts from a Target store are lined up in Encinitas, California May 22, 2013. REUTERS/Mike Blake