Despite the green shoots some retailers have observed in their reopened stores, the road ahead in returning to financial health is still a long one.
The University of Michigan’s Index of Consumer Sentiment in May barely inched up 0.7 percent to 72.3 from 71.8 in April, according to data published Friday. May’s results marked a 27.7 percent year-over-year drop, based on the Index standing at 100.0. Consumers’ view of current conditions rose 10.8 percent to 82.3, but their expectations for the near term fell 6.0 percent to 65.9.
“Consumer sentiment has remained largely unchanged during the past two months, with the final May estimate just a half index point above the April reading. The CARES relief checks and higher unemployment payments have helped to stem economic hardship, but those programs have not acted to stimulate discretionary spending due to uncertainty about the future course of the pandemic,” said Richard Curtin, the University of Michigan’s Surveys of Consumers chief economist. “It should not be surprising that a growing number of consumers expected the economy to improve from its recent standstill, or that the majority still thought conditions in the economy would remain unfavorable in the year ahead. This has been a common occurrence in past cycles.”
Favorable assessments about the current state of the economy tend to be more frequent near the end of expansions, he said. The current U.S. expansion through February was 127 months long, breaking the 120-month record of economic growth from March 1991 to March 2001. The U.S. coronavirus outbreak mushroomed in mid-March when state and local governments issued shelter-in-place mandates to try to curb the spread of the pandemic.
Retailers such as Burlington said sales at reopened stores are ahead of last year’s figures, while Macy’s has indicated that it has seen week-over-week growth, positive signs of consumer willingness to head to the stores to shop. And Nordstrom is optimistic about reopened stores in smaller market locations, even though they’ve been open for less than two weeks. Abercrombie & Fitch CEO Fran Horowitz said Thursday that U.S. consumers appear to be returning to stores at a quicker pace than their Chinese counterparts.
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But while there are positive signs–at least for some retailers–that many consumers are tired of hunkering down at home, Thursday’s report of first-time unemployment benefits is a reminder that the economic crisis as a result of COVID-19 is far from over. For the week ending May 22, another 2.1 million filed for jobless claims, pushing the pandemic total to 40.7 million Americans over a 10-week period. Of that number, many have been furloughed by companies hoping to reopen once local restrictions allow. But there’s a question as to how many of those businesses can realistically reopen, especially as shutdowns drag on. And even as retailers begin reopening stores, chains including Nordstrom and J.C. Penney are also reviewing their locations and identifying which doors might be ripe for permanent closure.
And first-quarter earnings results from retailers operating in the dollar-store channel show just how pressured many American consumers are when it comes to their financial well-being. Dollar General Corp. said sales jumped 27.6 percent to $8.4 billion, with same-store sales up 21.7 percent. And its rival Dollar Tree saw sales rise 8.2 percent to $6.29 billion, as comps gained 15.5 percent for its Family Dollar banner, although it fell 0.9 percent at its Dollar Tree nameplate due to lower Easter holiday sales.
“We have seen an increase in customers and no surprise, right? When the going gets tough, we know that our customers need us more, and we’re there for [them], but we also know from past recessionary times, and in times like these, that we have a customer that also starts to trade into Dollar General. We saw that in a very big way in [the first quarter]. We can validate that pretty easily through credit card data that we’ve seen,” Dollar General CEO Todd Vasos said in a conference call to Wall Street analysts on Thursday after the company posted first-quarter results.
Consumers showed the same behavioral patterns at the start of the Great Recession in 2008 and 2009 when Dollar General saw an influx of new customers. Vasos said he’s “very bullish” that Dollar General will continue to retain the new “customers for the long term.”
Dollar General, he added, is very well positioned: “The sweet spot, I would tell you, we do very good in good times and we do fabulous in bad times.”