A 16.4 % sales decline in April may signal the bottom for retailers, but the climb back will be hard, and some companies may not make it.
By guest authors Ben Casselman and Sapna Maheshwari from New York Times
The coronavirus pandemic dealt another crushing blow to retailers in April. Now the question is what the sector will look like as the economy reopens — and how much permanent damage has been inflicted.
Retail sales fell 16.4 % last month, the Commerce Department said Friday, by far the largest monthly drop on record. That followed an 8.3 % drop in March, the previous record. Total sales for April, which include retail purchases in stores and online as well as money spent at bars and restaurants, were the lowest since 2012, even without accounting for inflation.
Some of the declines in individual categories were staggering. Restaurants and bars lost half their business over two months. At furniture and home furnishings stores, sales were off by two-thirds. At clothing stores, the two-month decline was 89 %. Increased sales from online retailers didn’t come close to offsetting the downturn elsewhere.
April could prove to be the bottom for sales. The March figures were helped in part by panic buying, and stores were generally open for the first half of the month. Most states have begun to lift barriers to commerce and movement, and many economists expect spending to rise in May as people venture out.
But in contrast to the nearly vertical drop, any rebound is likely to be gradual. Big states like New York and California remain largely under lockdown, and businesses face significant restrictions elsewhere. Even as businesses reopen, there is no guarantee that customers will return in numbers previously seen.
And the financial system may be an added source of vulnerability as the economic downturn places strains on households and businesses, the Federal Reserve said Friday.
“It’s probably fair to say the worst is over in terms of a collapse, unless there are waves of new outbreaks,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But how fast does it come back? The short answer is none of us really know.”
The downturn appears to have left lasting scars on a retail industry that was already struggling. J. Crew and Neiman Marcus have filed for bankruptcy protection, followed Friday by J.C. Penney, a 118-year-old chain with more than 800 stores and nearly 85000 employees.
Surveys show that many Americans still fear the virus and are wary of crowded places. Epidemiologists and public health officials say those concerns are well founded: Anthony S. Fauci, the government’s top infectious-disease expert, told a Senate committee this week that rushing back to normal life could “trigger an outbreak that you may not be able to control.”
Even if Americans feel comfortable returning to stores, they may not have as much money to spend, since millions have lost their jobs.
“Consumers are definitely feeling anxious about the future,” said Jay Sole, a retail analyst at UBS. “Whether it’s the pandemic, which is making people hesitant to go out in public to crowded places, or they’re worried about their jobs or the state of the economy going forward, people’s willingness to spend has declined.”
The pressure is not limited to big-name companies. In a survey released by the Census Bureau on Thursday, nearly 90 % of small retailers reported being hurt by the pandemic, and few said they expected a quick rebound. A third said they thought it would take more than six months for business to return to normal, and 6.6 % said they did not expect a full recovery.
The plunge in sales, especially in areas like clothing, has shown how reliant many retailers have remained on physical outposts, even as the internet has upended the shopping landscape. J. Crew said in its bankruptcy filing that it expected to lose almost USD 900 million in sales because of the temporary store closings. The retailer’s most recent annual sales were about USD 2.5 billion.