U.S. retailers feel the pinch as frugal shoppers curb spending
By Siddharth Cavale and Sruthi Ramakrishnan
(Reuters) - Weak results from the likes of Wal-Mart Stores Inc (WMT.N: Quote) and Macy's Inc (M.N: Quote) are the latest sign less affluent U.S. consumers are still pinching their pennies and the trend appears to be hurting upmarket retailers as well.
A number of large U.S. retailers who cater to low and middle income consumers reported disappointing quarterly comparable sales this week, pointing to a cutback in spending and a shift in preferences to stores nearer to home.
"Consumers are still concerned about cost of living and employment...overall we are seeing no changes in the consumer than what we have seen in the last few quarters," Wal-Mart Chief Financial Officer Charles Holley said on Thursday.
Wal-Mart cut its profit forecast for the year, citing higher healthcare and online investment costs, but also cautioned that heavy discounting would continue into the holiday season to draw in its shoppers, many of whom depend on government assistance.
Even department store operator Macy's, which caters to a more affluent clientele, lowered its same-store sales forecast for the year.
The weak sales and margin data illustrate the effects of a slowly improving job market, volatile fuel prices and government food stamp cuts, Joseph Agnese, equity analyst at S&P Capital IQ told Reuters.
"Even though the job market has picked up, income growth is very weak. We are adding jobs but average earnings aren’t growing very rapidly," Robert Brusca, chief economist at consulting firm Fact and Opinion Economics, said in a phone interview.
Amid the general gloom, one surprising glimmer of hope came from struggling department store chain J.C. Penney Co Inc (JCP.N: Quote), which reported a 5 percent rise in quarterly sales and a narrower loss. Continued...