The closing of hundreds of thousands of stores and a scary economic outlook as the coronavirus outbreak spread led to the biggest drop in U.S. retail spending on record last month.
The U.S. Commerce Department said on Wednesday that retail sales, in-store and online, as well as spending in bars and restaurants, fell 8.7% compared to February, the biggest drop since the government began tracking the data in the 1980s and far worse than the declines seen during the Great Recession.
The month started off well enough. But as more and more cities and states mandated lockdowns, including massive store closings starting mid-month as the U.S. government declared a national emergency on March 13, worried shoppers stocked up on essentials and ignored the rest.
And April will likely be much worse.
“The whole month looks like it will be a write-off for retail, with stores remaining closed for the duration. Panic buying has now largely subsided and will not lift sales to the same degree,” says GlobalData Retail managing director Neil Saunders. “As ugly as March was, it appears to be a prelude to a hideous April.”
GlobalData Retail estimates 61% of all U.S. stores closed, about 260,000 locations. Many large chains had initially hoped to reopen in April, but now retailers from Abercrombie & Fitch to Macy’s says they’re closed until further notice.
Retailers selling groceries, medication, and other essentials fared well, especially early in the month. Grocery stores saw sales rise 25.6%, while at clothing stores, they fell 50.5%. And as consumers tried to save money on bigger-ticket items, spending on cars and car parts decreased by 25% last month. Despite an initial surge early in the month in electronics as people bought devices for homeschooling and entertainment, sales in that category plunged later in March. Sporting goods also fell sharply.
Perhaps most worrisome for retail is that even those stores allowed to remain open for business because they sell essentials, like Walmart, Target, and Costco Wholesale, face the prospect of slowing sales because they have to severely limit the number of shoppers they can let in at a time.
Best Buy, which closed stores to shoppers but has offered curbside pickup of online orders starting on March 22, said Monday sales have fallen 30% since then, a stark contrast to a strong start to March.
Still, in this environment, that decline would be the envy of many other big retailers. Macy’s, whose stores are all closed indefinitely, is reportedly working with bankers to restructure its debt given the collapse in sales, while Reuters has reported that J.C. Penney and Neiman Marcus are considering Chapter 11 bankruptcy protection filings.
Beyond the store closings, exploding unemployment—16 million Americans have filed for initial benefit claims in the past three weeks—and uncertainty about when the economy can reopen are weighing down on consumer confidence in yet another reason for the retail sector to worry.
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