Wall Street expects stormy retail week

A number of American traditional retailers will publish their first quarter results this week and no one is expecting good results.

Not much to boast about

On Wall Street’s calendar, JCPenny, Macy’s, Nordstrom and Kohl’s are due to publish their results, which will undoubtedly shed light on how the industry is evolving, but analysts are rather fearful. The American economy only grew 0.7 % in the first trimester, in part because family expenditure only grew 0.3 %, the worst since 2009.

Traditional retail is also hit the hardest, because there has been a steady decline in people actually going out to physical stores between 2010 and 2013 according to a real estate broker Cushman & Wakefield study. It slipped more than 50 % in that time frame and has only continued to drop ever since.

Real estate research agency Green Street Advisors calculated that the traditional department store’s turnover per square meter dropped from 165 dollars (in 2006) to 124 dollars (in 2016), without any improvement in sight.

Restructuring plans

All this has serious consequences: nearly 3,600 traditional department stores shut down in 2017 already and calculations point to 8,600 store closures by the end of the year. This would trump 2008, when the financial crisis hit and more than 7,000 stores had to close.

Obviously, this evolution will seriously impact the industry’s employment rates: more than 30,000 American retail jobs were lost in the first quarter already. The losses in February and March were the worst since November and December 2009, which clearly shows the industry is trying to restructure.

Online takes advantage

Investors are not averse to the entire retail industry, because they do like the new type of retailer, led by Amazon.com, Netflix and Priceline. Online sales nearly totaled 400 billion dollars (370 billion euro) in 2016, up 14.4 % compared to the year before. The Centre for Retail Research forecasts another 14.9 % increase in 2017 and even more (15.4 %) in 2018.

Several traditional companies have also managed to keep up: investors expect chains like Home Depot and Lowe’s to publish good results on the back of a recovering housing market, which makes home improvements all the more attractive from an investment point of view.