Although most retail stocks have fallen over the course of the last few weeks, some have managed to keep it together and come out unaffected. One statistic might explain why American dollar stores, Walmart and Target are successfully going ahead, whereas apparel chains and department stores have fallen.
Frugal customers now have increased spending powers, which is something retailers should factor in. Merrill Lynch and BOA stated that purchases by households with below $50000 income levels have grown by 6% during April when compared to last year. This is more than high-income and middle-income household spending growth rates.
Despite the China-US trade war, consumer confidence is still high due to low unemployment rates. Low-income household shoppers also went a lot to stores during the year’s start. However, instead of Nordstrom or Tiffany, they prefer Dollar Tree and Walmart.
This is the main reason discount stores are currently thriving even under unfavorable conditions elsewhere.
Outdated and enclosed shopping malls will be hit the most by this move. This will benefit Target and Walmart as competition in this sector shrinks even further.
Sears and JC Penny and other departmental stores have had to close stores in huge numbers. Forever 21, Dressbarn, Gap, A&F are all struggling currently. Dollar Tree, Dollar General, Costco, Target, and Walmart’s shares have gone up over 11%, 20%, 20%, 30% and 12% respectively this year. Web Smith, the founder of 2PM, a retail platform, stated that Americans had moved to empty lands filled with stores with the highest capita globally. The period including 1950s and later decades saw an explosion in suburban malls. People were convinced that this bubble wouldn’t ever pop.
However, it is going down for this sector rather quickly. 7150 closures have so far, been announced in 2019 by US retailers, as per reports from Coresight Research. Victoria’s Secret, Gymboree, Payless ShoeSource, Charlotte Russe, and Dressbarn were most affected.
However, BOA stated that low-income household spending was still going forward.