July Brings Another Downturn in Household Financial Stability

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Includes: DSW, GPS, JWN, TJX
by: Retail Eye Partners

The following results are based off our July consumer report:

The Big-Takeaways for July

  • Layoffs/loss of income are once again causing consumers to be very budget conscious and, as a result, significantly cutting back on spending
  • To avoid temptation, consumers just aren’t shopping (for large or small purchases) and this is despite numerous clearance sales and high levels of promotion this month
  • Consumers want cheap! We’re seeing more trade-down to lower priced stores and more shoppers looking for the cheapest version of the item they need
  • Teens/parents are back in the mall looking for back-to-school items and only buying when the price is deemed right. And while they are buying, consumers are hunting for the best deals this year regardless of whether it takes more time and effort
  • Interest/spending at mid/higher priced women’s apparel remains abysmal

The Results, Please!

July brings another downturn in household financial stability and increasing layoffs/loss of Income is the reason:

  • Household financial situation is on the move again and not in a positive way, as we see a drop to 61% of panelists who think their financial situation is the same as last month (down from 63% last month), with 26% of panelist feeling their situation is slightly to significantly worse than last month (up from 22% last month)
  • Layoff fears are on the rise as well and likely the reason panelist are feeling worse about their financial situation, as 39% of panelist feel that someone in their household could get laid off or receive lower income this year (up from 32% last month)
  • We’re seeing more optimism for the future, though, as more consumers believe that their financial situation will get better, with 49% who think their financial situation will improve (vs. 37% last month)
  • Confidence in the economy has stabilized and while not great numbers at least far improved from the Recession lows experienced in February, as only 37% of consumers feel the US economy is getting worse this month (vs. 34% last month and vs. 73% in February!), and 26% believe it is improving, vs. 22% last month (and 6% in February!)

With worsening financial situations, consumers are once again cutting back on spending and this time it’s pretty significant.

The biggest changes this month:

  • Fewer shopping trips overall (69% of panelists vs. 64% last month)
  • Shopping at less expensive stores (55% vs. 47% last month)
  • Postponing major expenditures (47% vs. 40% last month)
  • Buying the cheapest version of items on their shopping lists (46% vs. 43% last month, the highest level this year)
  • Cutting back on discretionary items (apparel, travel, eating out, consumer electronics) (63% vs. 60% last month)

Spending on apparel and accessories sees another cutback:

  • Women who are majorly decreasing their spending rose to 35% for July (the highest this year)
  • And major cutbacks for the family as well, rising to 30% for July (again the highest this year)

Most retailers saw declining trends in browsing and conversion levels as well as total spend this month:

  • For our women’s apparel retailers, browsing and conversion levels remained pretty flat to slightly down to last month with spending down for the majority of the group (particularly mid/higher end specialty players). Overall, spending is still focused on sale or coupon items, however, future spending plans remain flat to down across the universe except for our discounters who all saw a significant rise plan to purchase levels (TJX, Marshall's, DSW, Old Navy (NYSE:GPS))
  • For our broadline retailers, all metrics were flat to down for everyone in the universe, except Nordstrom (NYSE:JWN) due to the Anniversary Sale
  • For our teen retailers, browsing levels were flat for most of the universe vs. last month, although many did see better conversions as teens with parents in tow were in the malls starting their back-to-school shopping
  • For our home retailers, we saw flat to slightly improved browsing and conversion but better levels of spending as end of season sales on gardening and outdoor appealed to our panelists as well as some early promotions on back-to-college necessities
  • By region, for our apparel and teen retailers we saw declines in browsing and conversion in every market, while our broadline retailers experienced more mixed results with the Midwest, Mid-Atlantic and Southeast all experiencing rises in browsing and conversion

Disclaimer: No positions