Shoppers step protective masks exit from a Hennes & Mauritz (H&M) store in the Herald Square area of New York, U.S., on Thursday, Aug. 6, 2020.
Nina Westervelt | Bloomberg | Getty Images
“Adversity” is one word being used to describe the potential fallout for the retail sector from on-again, off-again economic stimulus talks in Washington, D.C.
“A compute retail disaster is unfolding before our eyes that is completely avoidable,” Andy Polk, a senior vice president at footwear bustle trade group FDRA, told CNBC.
“It is not an overstatement to say that pushing out any stimulus package until after the voting is a disaster and may cause a shoe retail collapse again, both in terms of crashing sales and retail job losses at shoe accumulates going into the holiday season,” he said.
In a tweet Tuesday afternoon, President Donald Trump cast reservations about the timing of economic stimulus payments to consumers. He said the White House was halting talks with Democrats, and the intelligence turned major stock averages sharply lower. But stocks were rising again by Wednesday morning, after Trump evidently changed course, tweeting support for aid to airlines and other stimulus measures, stoking hopes that a smaller aid unit could be passed by lawmakers.
“Many consumers are relying on some level of stimulus, some level of support, this fete season,” said David Bassuk, global co-leader of the retail practice at AlixPartners. “Holiday is starting now. This is the moment retailers need consumers to feel confidence.”
The retail industry’s leading trade group, the National Retail Amalgamation, is among those pushing for additional stimulus to fuel business.
“The pandemic isn’t over and neither is the economic crisis it has manufactured,” NRF President and CEO Matt Shay said in a statement.
Indeed, more than 7.5 million Americans have been determined with Covid-19 since the pandemic began, according to data from Johns Hopkins University. On average, more than the past seven days, the number of new U.S. cases is growing by nearly 44,000 each day, based on a CNBC analysis of Johns Hopkins’ observations.
Meanwhile, the unemployment rate in September was at 7.9%.
“There are many families still struggling to make ends meet and problems facing obstacles to putting workers back on the payroll,” Shay said. “We need a vaccine to ensure our personal condition. And we need further stimulus to ensure we can fix an ailing economy, bring people back to work and spur growth in communities big and small.”
The Business Roundtable, a group made up of CEOs from some of the country’s largest corporations that is chaired by Walmart CEO Doug McMillon, has also tagged on the president and on Congress to get back to work on relief legislation.
The group said “failure to reach a deal on additional recess would worsen and prolong the crisis for our country.”
Major retailers, including Apple, Best Buy and Home Depot, experience already seen how government stimulus can benefit their bottom line. In the spring, they said they got a spring in sales as Americans rushed to their stores and websites to spend extra money in their pockets. Some opted for discretionary articles they’d previously skipped over, such as TVs and apparel, the companies said.
The U.S. government issued millions of checks as as for of a historic $2 trillion relief package Congress passed in March to try to rev up consumer spending again to spark monetary recovery. Eligible adults received checks of up to $1,200, depending on income level. (Individuals making more than $99,000 a year, or dive filers making $198,000, didn’t get a check at all.)
Walmart said in August that its stimulus bump faded as shoppers fagged out that money. Chief Financial Officer Brett Biggs said spending tapered off in July, and he declined to cater a financial outlook for the year, citing stimulus as a factor.
“Stimulus was definitely impactful to the consumer in the second quarter, and we’re watching what’s universal on in Washington, and how we’re going to progress with a new stimulus package,” Biggs said in an interview with CNBC in August. “I conceive of certainly it would be helpful for consumers.”
Target CEO Brian Cornell said in August that he’d also like Congress to impel forward with another stimulus package to create more certainty for consumers and businesses. Yet he credited most of the big-box retailer’s strenuous sales last quarter to a shift in consumer spending, as families canceled summer vacations and couldn’t go out to dinner or to the talking pictures, rather than the government-issued checks.
More chaos
A breakdown of stimulus talks brings more chaos to an already frenzied holiday season pressured by a global health crisis and the distraction of a presidential election.
Americans are coping with uncertainty as the furloughs approach and they try to figure out how to safely celebrate, said Ashwani Monga, a Rutgers University-Newark marketing professor who overs consumer psychology. With no relief in sight from stimulus, cash-strapped consumers, in particular, won’t feel comfortable prosperous on a spending spree.
“The worst part of this pandemic is we don’t know if it’s three more months,” he said. “Is it 12 more months? Force it ever get over? Will we be wearing masks forever? No one knows. For the low-income consumer, you’re even more focused on provident for these rainy days than a high-income consumer who has enough buffer to go through these times.”
He said whether Congress approves additional stimulus desire have “tremendous implications for the economy overall,” since families tight on funds tend to immediately spend that pelf.
“You give them the money this week, and you’ll see people spend more this week,” he said.
And it’s not just close to retailers’ bottom lines. The industry is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and validating 1 in 4 U.S. jobs, according to NRF. Weak sales could translate into greater job losses down the line.
Retailers arrange been pushing discounts and holiday marketing earlier than ever this year to try to grab market share in during the pandemic and avoid last-minute bottlenecks in their supply chains. But consumers may end up waiting to shop closer to the red-letter days anyway because of the stimulus uncertainty, said Katie Thomas, who leads the Kearney Consumer Institute, a consumer value tank at the consulting firm Kearney.
Whether stimulus checks are issued will also impact how price responsive consumers become.
“The price gap always matters,” Walmart’s Biggs said at the Barclays conference on Sept. 8. “If we don’t get another stimulus package deal, which all of us are monitoring like you are, price probably matters even more.”
The lack of a deal could also put to boot pressure on the number of shoppers heading out to stores. That figure is already expected to drop as much as 25% year all about year during the holidays.
“Retailers and retail centers are already facing the prospect of diminished foot traffic due to the pandemic as we approximate on the important holiday shopping season,” said Ryan Severino, a chief economist for JLL. “Online sales will serve but are no panacea if consumers are not being supported.”