Americans are opening their wallets as they emerge from lockdown, with data showing US consumer spending picked up in May and even the hardest-hit retailers reporting that sales improved by more than they expected.
In the latest sign that the world’s biggest economy may be emerging from the worst of the pandemic-induced recession, data collated by Mastercard published on Wednesday showed total US retail sales, excluding the automobile sector, dropped 5.6 per cent in May from a year ago. In April, the figures showed a 14.1 per cent decline. Home improvement, ecommerce and groceries helped offset weaker sales of clothing, jewellery and other more expensive products.
Executives at the department store chains Macy’s, Kohl’s and Nordstrom, meanwhile, told investors this week that sales at reopened stores were gradually improving, even if they remained much lower than usual.
Steve Sadove, a former chief executive of Saks who is now senior adviser at Mastercard, said: “In my career I don’t think I’ve ever heard anyone say, ‘Gee I feel really good that my sales are only down 30 per cent’, but people’s expectations were that nobody would come out at all.”
The tentative signs of improvement will encourage those who believe the US will have a faster economic recovery than anticipated. Labour market figures last week showed that employers in the country added 2.5m jobs in May, confounding economists’ expectations that millions more positions would be cut.
Mastercard’s figures show that spending on home improvement has been one area of strength. US hardware sales, online and in-store, rose 36 per cent year on year in May. Furniture sales rose 7.5 per cent.
Internet shopping has buoyed spending across categories, including footwear, clothing and electronics. In April and May, ecommerce made up 22 per cent of all retail sales, double that of the previous year.
In contrast, sales at department stores, clothing chains and other bricks-and-mortar retailers collapsed as coronavirus spread in the US, both because of the economic decline and rise in unemployment and because the health crisis forced stores to close.
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Recent civil unrest has added to the pressure by prolonging closures and forcing some reopened stores to bring the shutters back down.
Still, more shoppers have been venturing out as authorities have loosened restrictions. Kohl’s, for instance, had more than 1,000, or about 90 per cent, of its properties open as of this week.
Speaking at a virtual retail conference on Tuesday, Michelle Gass, chief executive of Kohl’s, said that so far this quarter sales in those stores that had reopened were 25 per cent below last year’s levels. Despite the sharp decline, she said Kohl’s stores initially had 40 to 50 per cent drops in sales when they began to reopen at the start of last month, and she was “encouraged” by the improvement.
At the same conference, Jeffrey Gennette, chief executive of Macy’s, said the company had expected sales at reopened stores to drop at least 80 per cent from last year. Instead, they were down about 50 per cent and “each week that they’re open, they’re getting a little bit better”.
Erik Nordstrom, chief executive of Nordstrom, said the company had 40 per cent of its properties open and planned more reopenings in the coming days. He said results were “ahead of expectations”, but was cautious about reading too much into initial sales figures.
There was “clearly a stabilisation in the retail environment”, said Mr Sadove, adding that stimulus funds from Washington of up to $1,200 per person and steep discounts at some retailers had encouraged customers to spend. “But it’s off a very low base.”
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