Pandemic Hits Spending Hard; 79% Dive In Clothing Sales Leads A Record Plunge | WAMC

Pandemic Hits Spending Hard; 79% Dive In Clothing Sales Leads A Record Plunge

May 15, 2020
Originally published on May 18, 2020 1:17 am

Updated at 9:31 a.m. ET

In a historic collapse, retail spending in the United States nosedived again last month, dropping a record 16.4% as people avoided restaurants, bars, stores and malls during the coronavirus pandemic.

The devastation spread across virtually all sectors, hitting clothing and furniture stores, restaurants and gas stations. April's plunge nearly doubled the record drop of 8.3% set just a month earlier. Retail sales — a measure including spending on gasoline, cars, food and drink — are a major part of the economy, which has been battered by the lockdowns across the country, which has led to tens of millions of layoffs.

Online retailers were the only category still seeing growth in April, Friday's data showed. It's a growing part of the economy, compared to other retailers that had to temporarily close doors, firing or furloughing staff and losing sales.

The hoarding and panic buying at grocery stores had slowed in April compared to the previous month, with sales falling by 13.2%. Overall, however, people have continued to fill their pantries more than they normally do and both food and other grocery store purchases were up compared to last year.

Here's how spending drops affected different parts of retail in April, compared to a month earlier:

  • Online (nonstore) retailers: +8.4%
  • Grocery stores: -13.2%
  • Pharmacies and other health/personal care stores: -15.2%
  • Big-box (general merchandise) stores: -20.8%
  • Gas stations: -28.8%
  • Department stores: -28.9%
  • Restaurants and bars: -29.5%
  • Sports, music and other hobby stores: -38%
  • Furniture stores: -58.7%
  • Clothing and accessories stores: -78.8%

Don't see the graphic above? Click here.

Economists have warned that many retail stores would not make it through the pandemic, especially smaller chains and companies that had weak financial footing before the health crisis. One recent survey found a quarter of clothing retailers wondering whether they'll make it till the holidays.

Preppy fashion store J.Crew and luxury department store Neiman Marcus became the first two major retailers to declare bankruptcy during the pandemic, tipping over from their preexisting debt. Others are likely to follow, including the suburban-mall staple J.C. Penney.

Some nonessential stores and malls began reopening this month as more mayors and governors are lifting shelter-at-home restrictions. Shopping centers are restricting the number of visitors, closing off play areas and some fitting rooms, investing in air purifiers and hand sanitizer stations — even turning parking lots into drive-in movie theaters.

But unemployment is now at 14.7% — the highest rate since the Great Depression — and expected to soar further. And surveys show that many shoppers remain leery about going back to casual mingling and browsing, at least for a while. A lot hinges on the virus and testing as well as progress with vaccinations and treatments.

"Anxiety and fear are very strong emotions and consumer behavior may take time to adjust," Jack Kleinhenz, chief economist at the National Retail Federation, wrote in his latest economic review. "But in the end, shopping is more than a transaction. It is a social activity that is part of the fabric of American life."

The NRF has warned, however, that the severe damage on the U.S. economy would continue showing up in economic data in the second quarter. For example, even as Chinese factories and U.S. stores began to reopen, the NRF flagged a continued slowdown in merchandise imports arriving at U.S. ports.

That's why economists are also warning about a potentially devastating holiday season. Stores and brands typically begin preparing for the all-important end-of-the-year sales around now. But the pandemic is causing many of them to delay new orders, sock away some of the spring fashions and wonder how the world might look by then.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

STEVE INSKEEP, HOST:

If you work in retail, April came in like a lion and went out pretty much the same way. It was disastrous for retail stores and restaurants - a record 16% plunge in business, according to numbers out this morning, almost double the very bad numbers we saw from March. NPR's Alina Selyukh is covering this story. Good morning.

ALINA SELYUKH, BYLINE: Good morning.

INSKEEP: Walk us through the collapse here.

SELYUKH: Yeah, it's hard to overstate the devastation. I mean, we're talking virtually businesses everywhere feeling the pain. And I just want to say, why this matters so much is because this spending by people is what drives the economy. Two-thirds of U.S. economic activity depends on people going out and shopping and buying food.

INSKEEP: What businesses are feeling the most pain?

SELYUKH: Yeah, so I've been thinking about it in the context of a, quote-unquote, "normal year" last year. And we're seeing that people pretty much stopped buying clothes - hands down - almost entirely. That's why you're seeing some of the struggling chains like J.Crew and Neiman Marcus, maybe even J.C. Penney, looking at bankruptcy for relief. Then you look at...

INSKEEP: Why buy fancy clothes when nobody's going to see you or nobody's going to say anything but your caller on Zoom?

SELYUKH: You don't have anywhere to go. Exactly. And then you have electronics and furniture. And for a bit there in March, you saw a run on tech gear, laptops, batteries, office chairs and desks, and in April, that got wiped out. Restaurants and bars have lost almost half their business.

INSKEEP: Wow.

SELYUKH: And you can just keep going down the list like that - cars, music and book stores, gas stations, all those so-called nonessential businesses.

INSKEEP: Well, I got to tell you, it's so appalling, and I know that it's such a disaster for so many businesses that are completely closed. I'm actually a little surprised it's only a disastrous 16% plunge. I wouldn't have been surprised to hear a number that was even worse.

SELYUKH: Right. Well, you know, people are still buying things. They're getting gas. They're ordering food and drinks, just in a different way. And a couple of businesses are doing actually better. One of them is online shopping - not a surprise. People cooped at home, stocking up online on necessities but also things that just make them feel better - everything like spices and cookware and gym equipment and books. And I'm just naming things I've personally bought online.

INSKEEP: Right.

SELYUKH: And then you've got a spurt of home improvement projects and gardening giving a bit of relief to home improvement stores, although that did slow down a bit in April. And then, finally, grocery stores - they're essential. People need food, medicines, home supplies. Companies like Walmart and Amazon's Whole Foods have even been hiring more workers. So they're having a pretty strong spring saleswise. And even there, I have to say, in April, we did start seeing a slowdown from those early weeks of, you know, panic-buying and hoarding.

INSKEEP: Well, now we're moving into a new situation in which some states are reopening. Retail stores have to reopen very carefully - social distancing rules.

SELYUKH: Right.

INSKEEP: But they can open their doors. Does this mean the worst is over?

SELYUKH: The very worst? Perhaps. But we will see the impacts for a long time. Some of them are permanent closures. Some people might feel comfortable going back to public spaces, like stores and restaurants, but surveys suggest most people are going to need some time. Lots depend on testing and vaccinations and treatments. Then remember - we're almost at 15% unemployment. How much shopping will people be doing when they don't have an income?

And plus - this is a weird thing to bring up - but holiday shopping is usually now when stores are placing their orders for that all-critical season. And one survey recently asked clothing retailers about their biggest worries about that season, and more than a quarter said they worry that they simply won't survive by then.

INSKEEP: Wow. Alina, thanks.

SELYUKH: Thank you.

INSKEEP: That's NPR's Alina Selyukh. Transcript provided by NPR, Copyright NPR.