U.S. retailers last quarter suffered their darkest days since the recession.
With results in from 62 of 122 retail chains, the industry has posted its first profit quarterly drop since the economic contraction that ended in 2009, according to Retail Metrics Inc. Revenue also rose at the lowest rate since that year, the research firm found.
The results paint a grim picture of an industry hit hard by the sluggish job recovery and slow wage growth, which have turned U.S. consumers into a nation of penny pinchers. Earnings are expected to drop 6.1 percent on average during the holiday quarter, according to Retail Metrics data. The broader pool of Standard & Poor’s 500 Index companies, meanwhile, are estimated to see profit rise 8.5 percent.
“It was a very tough season for the retailers, no question about it,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said in a phone interview. “They were facing pressure on multiple fronts.”
Still, some chains are predicting a rebound this year. Target Corp. -- which saw profit and revenue tumble last quarter, in part because of a hacker attack -- said yesterday that sales have shown signs of improvement this month. Macy’s Inc. also predicted that spring would bring a sales recovery, after frigid weather forced it to close hundreds of stores.
For the past quarter, retailers’ total revenue is expected to climb 1 percent, the smallest gain since the third quarter of 2009, according to Retail Metrics. The lack of wage gains restrained many consumers from making discretionary purchases, Perkins said. To cope, some chains cut prices by 50 percent to 60 percent. The industry hasn’t seen such heavy discounting since the “fire sale” that took place during the 2008 holiday quarter, he said.
Teen retailers were the hardest hit, based on adjusted earnings per share. Their profit is decreasing 37 percent, Retail Metrics found. Electronics chains are down 17 percent, and discounters are dropping 12 percent, the firm said.
Thirty-four percent of the retailers missed analysts’ estimates, compared with a 13-year average of 20 percent. While many retailers have yet to report their results, those chains are smaller and unlikely to affect the overall picture, Perkins said.