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Retail Sales Rise While Stores Close in June

by Ivana Vojinovic

The Commerce Department data shared on Tuesday shows that retail sales rose by 0.4% in June, while the Coresight Research report indicates that more retail stores have closed so far in 2019 than over the entire course of last year.

The current state of U.S. retail can be described as contradictory, with sales reports surpassing economists’ expectations on the one hand and brick-and-mortar stores closing at a tremendous rate on the other.

Sales up in June

The data published by the Commerce Department reveals that retail sector sales made in June grew by 0.4% compared to May, even though economists polled by Reuters predicted that the growth would be only 0.1%.

Increased retail sales in June – mostly relating to vehicles, gasoline, building materials, and food services – following strong sales in April and May indicate that consumers have stepped up their spending in the second quarter. This trend might help soften some of the blow on the economy caused by weak business investments.

Mark Cohen, director of retail studies at Columbia Business School, suspects that the current consumer spending habits will be short-lived, due to the fact that the nation is heavily indebted.

“Consumers are increasingly overextended. Consumer debt, student debt, and mortgage debt are at record levels. Consumers are fueling their spending through debt,” Cohen told Marketplace.

He also predicts a sharp pullback in the retail sector, caused by trade tensions and hiking tariffs. “There’s major insecurity with regard to retail pricing caused by the tariff kerfuffles going on between the U.S. and China, Europe, Canada, and Mexico.”

Number of brick-and-mortar stores down

A Coresight Research report that tracks the number of retail store closures and openings, updated weekly, shows that more stores have closed in the first 28 weeks of 2019 than in all of 2018.
Last year, which was considered very bad for retailers, saw 5,864 stores close and only 3,258 open. This negative trend shows no sign of stopping in the current year, on the contrary.

Fred’s, Charming Charlie Holdings, Payless ShoeSource, Dressbarn, Charlotte Russe, Family Dollar – these are just a few of the 7,062 retailers who have closed some or all of their retail locations in 2019. And the number of stores that have opened so far this year is only 3,017.

Consequently, the retail sector will see substantial job cuts. Outplacement company Challenger, Gray & Christmas reports that retailers announced 53,248 job cuts through June this year. The total number of layoffs from the sector last year was 98,563, the highest since 2009.

Vice President of the company, Andy Challenger, draws attention to the fact job losses are distributed unevenly across the country.

“A lot of those job cuts are in retail locations in rural America, in smaller towns, whereas a lot of the jobs being created in warehouses and distribution centers are closer to major metropolitan areas,” Challenger commented to Marketplace.

E-commerce is the downfall of traditional retail because store owners, burdened with the high cost of stores and employees, are finding it impossible to match the competitive prices online merchants offer. It appears that retailers who have adjusted to the demands of modern shoppers by providing an omnichannel experience are doing the best.

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