• June 3, 2023

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Home Depot’s recent announcement that it expects fiscal 2023 same-store sales to decline by as much as 5% — its first retreat since 2009 — may be a harbinger of things to come for the bricks-and-mortar retail universe as consumers shift their discretionary spending from goods to experiences. To make matters even dicier, the Federal Reserve’s most recent report suggests that last year’s inventory glut remains a stiff headwind, hovering just below its peak reading earlier this year.

That’s the sober reality behind the hopeful-sounding report from the Commerce Department that, after a two-month decline, retail sales rose slightly in April (0.4%), suggesting a turnaround might be in the works. Behind the headlines (“Shoppers Boosted Retail Sales”), a very different picture emerges.


For starters, year-over-year retail sales growth has steadily declined since last July — up 1.6% this April versus 8.2% a year ago. More importantly, the topline retail sales figure lumps bricks-and-mortar spending with non-store retail. But since November, spending on goods fell four out of the last six months.

When you break the details down further, you discover that non-store retail (e.g., ecommerce) rose 8%, health and beauty spending was up 7.9%, and food and beverage services spiked 9.4%. Consumers are buying less stuff and spending more on experiences.

This trend would explain why Target’s sales for the quarter ended April 29 were flat compared to last year. Target reported that comparable-store sales in beauty products grew by about 15% while sales declined in apparel, home, and hardlines, accounting for more than half of the company’s sales.

While companies like Walmart and Target have reported progress in winnowing their inventory backlogs, the overall picture is daunting if these shopping trends continue. So far, there are no signs that destocking by American retailers is over, and restocking has begun. According to a report in The Wall Street Journal, shipping and logistics providers say inbound volumes of containers from Asia into West Coast ports are down by almost a quarter from last year.

The change in consumers’ spending habits may be the final nail in the coffin for retailers struggling but got a stay of execution during the pandemic from the surge in consumer spending and low-interest rates.

The list of retail bankruptcies has been growing — Bed Bath and Beyond, David’s Bridal, Christmas Tree Shops, discounter Tuesday Morning, Tupperware Brands, and Party City.

As the pandemic fades and consumers pull back, expect to see more store closings and liquidations.


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