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RetailCoronavirus

Retail sales plunge a record 16.4% in April—the worst drop in history

Phil Wahba
By
Phil Wahba
Phil Wahba
Senior Writer
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Phil Wahba
By
Phil Wahba
Phil Wahba
Senior Writer
Down Arrow Button Icon
May 15, 2020, 11:15 AM ET
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April 2020 was one for the record books for U.S. retailers. And not in a good way.

Hampered by massive store closings, economic uncertainty, and soaring unemployment as the coronavirus idled huge swaths of the U.S. economy, retail spending fell a record 16.4% in April from March, the Commerce Department reported on Friday.

Hit particularly hard were clothing stores, where business was down 78% compared with March (and 89% compared with April 2019). Other big losers last month were electronics and appliances (-60.6%), furniture and home furnishings (-58.7%), sporting goods (-38%), and bars and restaurants (-29.5%).

On a more positive note, online sales rose 21.6%, though that is only a few percentage points higher than e-commerce had been growing in the past year, suggesting that the digital boom is not doing all that much to mitigate the pain of in-store sales declines. Grocery sales were also down compared with March, as panic buying slowed, yet they were up compared with April 2019, as people have stayed home and cooked more since restaurants last month were largely dark across the country.

The results suggest who some of the big winners and losers will be in the first quarter, as the major U.S. retailers start to report quarterly results next week.

The decline in apparel sales, which followed big drops in the second half of March, promises to be punishing for companies like Gap Inc., Kohl’s, Nordstrom, and Macy’s, but they have strong e-commerce firepower to mitigate some of that with curbside pickup. They get more than 25% of sales online. Neiman Marcus and J.Crew recently filed for Chapter 11 bankruptcy, while J.C. Penney is reportedly considering making the same move.

The drop in some previously strong categories, notably electronics and home furnishings, where sales were up early in the pandemic as people prepared their homes and offices for a long period of work from home, reflects the restrictions some retailers have placed on how many shoppers can come in at a time. Best Buy, for one, has just recently allowed people to come into stores again, but only if they have an appointment.

Even the biggest retail winners in this pandemic—Walmart, Target, and Costco Wholesale at the top of that list—are seeing a slowdown as they, too, have to limit traffic inside stores and as sales of essentials begin to return to normal, even as demand for discretionary items remains weak. Target, for instance, said last month that e-commerce had nearly quadrupled in April, while in-store sales were down by a mid-teens percentage.

While April is likely to be the worst of it, as stores and malls around the country start to reopen gradually, retailers are in for a lot more pain this year.

“The pace of opening is slow, and many shoppers remain in financial distress. As such, May will not be a month of celebration. Nor will June. Nor July. Nor probably the rest of this year,” said Neil Saunders, managing director of GlobalData Retail.

About the Author
Phil Wahba
By Phil WahbaSenior Writer
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Phil Wahba is a senior writer at Fortune primarily focused on leadership coverage, with a prior focus on retail.

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