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The Entire Retail Industry Is In Trouble

05/22/2014

Trouble-Ahead-4fc8facebf9c7_hiresThe retail industry is in trouble.

61 retailers reporting 1Q have missed estimates by an average of 2.6%, well below the long-term average of a 3% beat, according to Retail Metrics President Ken Perkins. First-quarter average profit is estimated to be down 2.3%, versus the 7.7% quarterly average profit growth of the past 15 years, he said.

”The crux of the problem for retailers is the majority of Americans are not making enough money to grow their expenditures on discretionary purchases and are either keeping them flat or cutting back,” said Perkins.

Bingo!

You can blame the harsh winter – but that doesn’t account for huge upsides in winter boots, snow-blowers, travel agencies, etc. You can blame Millenials for shopping not buying – but that doesn’t explain Amazon’s or Whole Foods’ robust 1Q. Blame what ever you want…just don’t blame consumers.

The tepid economy, health care uncertainty and lack of job security has beat down consumers to a low point. And that’s just the start of it.

Unfortunately for retailers consumers’ concerns are just one of the big issues they face today. Security breach concerns, like those that hit Target and Michael’s, have nearly doubled in the past 6 years. This is only the second year that data security has landed among the top 10 risk factors for major retailers.

Labor issues, including health coverage and unions, were cited by 91% of retailers as a business risk, up from 74% in 2009, the study showed. Retailers also are worried about increased staff turnover as the job market improves.

The remaining months of 2014 show no promise of improvement. For many retail brands this year may be the year of reckoning…which isn’t going to be pretty.

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