Tinier tax refunds hurt ritzy shops more than discounters

Lower, slower income tax refunds that have dragged on retail sales this year are disproportionately hurting upscale stores, since high-income shoppers are more likely to get an unexpected bill from the Internal Revenue Service under changes backed by President Trump and congressional Republicans.

February revenue at U.S. retailers fell 0.2 percent from the month before to $506 billion, the Census Bureau said Monday, and merchants placed much of the blame on cold weather, stock market fluctuations, and shrinking refunds after a GOP-led tax overhaul that eliminated or cut many of the deductions once claimed by people earning $100,000 a year or more.

Those changes, and Treasury Department efforts to buoy take-home pay through adjustments to withholding tables, left some taxpayers getting little to no money back from the IRS and often having to make surprise payments.

The total number of payouts issued so far this year is down 2.6 percent from the same period in 2018, according to IRS data, and the amount has dropped 2.9 percent to $191.9 billion. The refunds have already become a talking point in the 2020 presidential race, and a CNN poll last year showed the tax bill — which granted a large break to businesses — dragged on Republicans in the 2018 midterms when voters gave Democrats a majority in the House of Representatives.

“We see the most risk to households in the upper-income demographics, particularly those that live on the coasts, as they likely get impacted” by limits on state and local tax deductions, said Michael Lasser, an analyst with Swiss lender UBS. That weighs on retailers such as Restoration Hardware and Williams-Sonoma, while leaving discount stores such as Walmart unfazed, he said.

It’s “something that we’re watching closely,” Jack Preston, senior vice president for finance at Corte Madera, Calif.-based Restoration Hardware, told investors and analysts last week. “We’ve heard anecdotes of people being surprised with the tax bills as they prepare their tax returns.”

Overall, however, store owners remain optimistic about the rest of 2019, according to the National Retail Federation, which represents businesses contributing $2.6 trillion a year to the U.S. economy. The group’s chief economist, Jack Kleinhenz, noted that original estimates for January sales were revised upward and that online merchants saw gains compared with both the previous month and February 2018.

“The consumer has not forsaken the economy as some previously claimed,” he said in a statement. “We still expect growth to pick up, fueled by strong fundamentals like job and wage growth.”

The jobless rate remained at 3.8 percent in February, near a 50-year low, and average hourly pay grew 3.4 percent to $27.66, according to the Bureau of Labor Statistics.

Washington Examiner

Booming jobs market is leaving the retail industry behind

  • Despite strength in jobs from manufacturing to medicine, retail is one of just two sectors that have lost jobs over the last few years.
  • Since January 2017, retail has lost more than 140,000 jobs; the sector added to those losses in March 2019, according to Labor Department data.
  • “Retail is a sector where automation has been particularly present,” said PGIM’s Nathan Sheets. “U.S. consumers have manifest over many years that they want low prices, even if that means less help from workers on the floor.”

Though many American industries have ramped up hiring in recent years amid a strong economy and easier regulations under President Donald Trump, one sector in particular has lagged the rest: retail.

Since January 2017, retail has lost more than 140,000 jobs; the sector added to that in March 2019 with a loss of more than 11,000, according to Labor Department data. The sector is one of just two industries that have lost jobs over the last few years, according to data tracked by CNBC.

For example, an aging baby boomer population has fueled employment in the health-care industry, while the post-crisis business sector has supported the addition of tens of thousands of jobs per month. The government’s Friday report on the employment situation showed the health care sector alone added 61,000 jobs in March, while the business industry tacked on another 37,000.

Despite strength in jobs from manufacturing to medicine, retail is one of just two sectors that have lost jobs over the last few years. Since January 2017, retail has lost more than 140,000 jobs; the sector added to those losses in March 2019 with a loss of more than 11,000, according to Labor Department data.

The lukewarm performance in the retail sector have come despite a broader economic groundswell, with Trump’s corporate tax cuts giving businesses a balance sheet boost, goosing GDP growth above the rate many economists feel is sustainable.

The utilities sector, the only other to have seen a net decline in jobs since 2016, employs less than 1 million people. Retail employs more than 15 million.

Automation effect

Theories on the employment softness range from analyst to analyst, most agree that the downtick in the number of people working at big-box retail locations has to do with the rise of e-commerce and technology.

“Broadly speaking, retail is a sector where automation has been particularly present. Self-checkouts are now common. If you’re not sure about a price, you scan the bar code rather than asking a worker,” Nathan Sheets, chief economist at PGIM Fixed Income.

As an example the thriving shift toward automation at retailers nationwide, Walmart announced earlier this year that it is expanding its “Scan & Go” technology to an additional 100 locations across the U.S. For consumer staples like groceries that customers still don’t feel comfortable purchasing online, Kroger’s new “Scan, Bag, Go” platform will allow shoppers to scan their items themselves and allow the chain to cut cashiers at 400 locations.

Gap, Victoria’s Secret, J.C. Penney, Tesla and Abercrombie & Fitch have all announced that they’ll be closing locations in 2019; 4,810 store closures had been announced by retailers by March 2019, according to Coresight Research.

The push toward automation checkouts comes as major retailers and supermarkets come under pressure to generate even more profit out of a razor-thin margin business while offering customers a unique shopping experience.

“As a related point, the ongoing shift in retail from bricks and mortar to online very much reinforces this trend. For online sales, you largely eliminate customer-facing employment,” Sheets added. “U.S. consumers have manifest over many years that they want low prices, even if that means less help from workers on the floor.”

Perhaps emblematic of the struggles of some retailers to keep up in the modern era, the October bankruptcy filing of Sears Holdings represented for many economists a key moment in the shift toward a leaner business model.

Others, like National Retail Federation chief economist Jack Kleinhenz suggested that the government data may not suggest a decline in retail business, but rather a shift in the types of people they employ.

“You could now have a major retailer that owns a warehousing and distribution center, and products never go through a store,” Kleinhenz said. “There has been improvement in productivity and the use of technology. I caution us to be unnerved by these numbers at this point in time.”

“The retail industry is actually in sync with the economy and is growing at a pace that is appropriate, but we have to broaden our scope” of how we measure it, he added.

Instead of employees lining up at brick-and-mortar store locations, the rise of e-commerce is driving demand for transportation and warehousing staff. A current driver shortage beleaguers the trucking industry thanks to a combination of low compensation, burdensome schedules and conditions of the job.

But amid a new generation of consumers accustomed to smartphone shopping and two-day shipping, retail demand for storage square footage is soaring. Some savvy investors, such as Blackstone’s Jonathan Gray, have actually poured money into the warehousing business in an effort to preempt the broader trend and capitalize off the scaling need for space.

Gray told CNBC in July that the firm had purchased more than 550 million square feet of warehousing since 2010.

“As you think about investing, you’re trying to think about sort of where the puck’s going to, what’s happening. We came to a simple view that online sales were going to grow,” Gray said from the Delivering Alpha Conference in New York in 2018. “As a result, we’ve seen this pickup in demand for warehouse space, which traditionally was a pretty boring business.”

“In an environment where it’s hard to invest, finding things you have high conviction in, where you think there’s going to be growth – that’s a pretty good strategy,” he added.

Retail Industry Employment Dropped Again in March

According to numbers released last week by the Department of Labor, retail is one of the few industries losing jobs in a generally stable economic climate.

Retail employment in March was down by 11,700 jobs, seasonally adjusted from February, and down 47,400 jobs unadjusted year-over-year. The United States saw a monthly gain of 196,000 jobs overall (across all industries) in March.

National Retail Federation (NRF) chief economist Jack Kleinhenz, for one, said the numbers don’t paint an accurate picture of the industry. In a statement from the NRF, the economist said the overall growth in employment “paints a picture of resiliency of the U.S. economy” and that “consumer confidence and consumer spending were down earlier in the year, so the retail numbers likely reflect merchants’ hesitancy to add to payrolls under those conditions.”

That may be, but it’s notable that retail has posted job losses for three solid months: Since January 2017, the industry has lost more than 140,000 jobs (including 18,500 jobs in February), according to the Department of Labor.

A confluence of factors is impacting retail’s job growth, say industry watchers. Among them is the downsizing of retail—led by the continued closing of big box and department stores—and an increase in automation, which may be shifting retail’s jobs away from stores and into technology and other back-of-house jobs.

Kleinhenz told CNBC, “You could now have a major retailer that owns a warehousing and distribution center, and products never go through a store. There has been improvement in productivity and the use of technology. I caution us to [not] be unnerved by these numbers at this point in time.”

Overall unemployment in March was 3.8 percent, unchanged from February.

 by EMILI VESILIND

JCK the Industry Authority

NRF: RETAIL SALES RECOVERED IN JANUARY

Retail News

 The numbers exclude automobile dealers, gasoline stations and restaurants.

“Retail sales recovered in January after the unexpected drop in December, reinforcing a positive start to 2019,” says Jack Kleinhenz, chief economist, NRF. “American consumers regained confidence as concerns over the government shutdown and stock market volatility faded and trade talks moved in a positive direction. Although some hesitancy is still lingering, it is good to see consumer spending showing traction given the concerns on the minds of American families last month. We expect higher wages and low unemployment to continue to promote consumer confidence in the year ahead.”

As of January, the three-month moving average was up 2.7 percent over the same period a year ago. The January numbers follow an unexpected revised 0.1 percent drop in December year-over-year. November (the first half of the holiday season) grew 5.1 percent unadjusted year-over-year.
NRF does not count October as part of the holiday season, but much holiday shopping has shifted earlier, and October was up 5.7 percent year-over-year.

“Retail sales in December were revised even lower, but these figures remain suspect given the reporting delays caused by the government shutdown,” says Kleinhenz. “The January rebound further calls into question the accuracy and reliability of the December data. The processing of the delayed data is still unclear, and the volatility of the figures reported is difficult to explain at this point.”

The results come as NRF is forecasting that 2019 retail sales will grow between 3.8 percent and 4.4 percent to more than $3.8 trillion. The forecast will be monitored and subject to revision as more data is released in the coming months.

NRF’s numbers are based on data from the U.S. Census Bureau, which reported that overall January sales, including auto dealers, gas stations and restaurants, were up 0.2 percent seasonally adjusted from December and up 2.3 percent unadjusted year-over-year.

Specific retail sectors during January include:

  • Building materials and garden supply stores were up 10.4 percent year-over-year and up 3.3 percent month-over-month seasonally adjusted.
  • Online and other non-store sales were up 6.3 percent year-over-year and up 2.6 percent month-over-month seasonally adjusted.
  • Grocery and beverage stores were up 4 percent year-over-year and up 1.1 percent month-over-month seasonally adjusted.
  • General merchandise stores were up 3.2 percent year-over-year and up 0.8 percent month-over-month seasonally adjusted.
  • Health and personal care stores were up 2.4 percent year-over-year and up 1.6 percent month-over-month seasonally adjusted.
  • Clothing and clothing accessory stores were up 2.1 percent year-over-year but down 1.3 percent month-over-month seasonally adjusted.
  • Furniture and home furnishings stores were down 2.5 percent year-over-year and down 1.2 percent month-over-month seasonally adjusted.
  • Electronics and appliance stores were down 3.2 percent year-over-year and down 0.3 percent month-over-month seasonally adjusted.
  • Sporting goods stores were down 6.2 percent year-over-year but up 4.8 percent month-over-month seasonally adjusted.

March 18, 2009

License News

Could the tariffs ruin the holidays for shoppers?

October 3

“Get out the Ouija board.”

That’s how one retail analyst summed up the tricky task of predicting what lies ahead for retailers and shoppers this holiday season. Analysts say there’s ample reason to expect record-breaking sales on the back of a strong economy, a historically low unemployment rate and upward-ticking wages.

But that’s all hedged by a hefty unknown: the threat of ongoing tariffs and an escalating trade war. President Trump’s latest round of tariffs have kicked in at 10 percent and are set to rise to 25 percent at the start of 2019. Nearly 6,000 products — including electronics and other go-to gifts — will see price increases that, in time, are expected to pass from retailers to consumers.

And while it’s unlikely that the brunt of those price hikes will take a toll over the next few months, experts agree that the sheer concern over how long the tariffs will last, and to what degree, could act as a Grinch to holiday shoppers.

“Business doesn’t manage uncertainty well, nor does the consumer, and there is no way prices don’t get passed through the consumer,” said Mark Cohen, director of retail studies at Columbia Business School. “The problem I have is, who knows on a day-to-day basis where this is headed?”

The retail industry is still optimistic. On Wednesday, the National Retail Federation announced it is expecting retail sales in November and December to increase between 4.3 and 4.8 percent over 2017 results, to as much as $720.89 billion. That forecast compares with an average annual increase of 3.9 percent over the past five years. (If Labor Day is any indicator, Americans spent a record $2 billion online then alone.)

But for comparison, holiday sales in 2017 rose 5.3 percent over the year before, totaling $687.87 billion, according to the NRF.

In mid-September, Deloitte anticipated retail holiday sales to increase 5 to 5.6 percent over last year’s shopping season — totaling at least $1.1 trillion between November and January. Rod Sides, leader of Deloitte’s U.S. retail and distribution practice, said shoppers are unlikely to make their shopping decisions based on geopolitical issues, such as global trade.

“A lot of it comes down to when they look in their checkbook or their pocket,” Sides said. “If they have a few extra dollars, whether it be the stock markets to the election to tariffs, it typically doesn’t trickle down.”

At the same time, retailers and industry groups have made their opposition to the tariffs clear. Last month, Walmart sent a letter to U.S. Trade Representative Robert E. Lighthizer cautioning that additional tariffs on $200 billion of Chinese goods would strike a blow. Walmart — the largest retailer in the country — wrote that the “immediate impact will be to raise prices on consumers and tax American businesses and manufacturers.” Target chief executive Brian Cornell said the company was “concerned about anything that would cause higher prices on everyday products for American families.”

That’s in concert with arguments from industry groups that say the tariffs will trigger price increases, even if not by this Thanksgiving or Christmas. The Retail Industry Leaders Association, an industry lobbying group, wrote to Lighthizer in September requesting the removal of more than 650 tariff lines from the proposed list of products subject to the latest wave of tariffs. Any tariffs on consumer goods proposed by Trump’s administration, the group wrote, are “nothing more than a hidden tax.”

Larger retailers have long since secured low-priced inventory to get them through the holidays and into the new year. But Hun Quach, vice president for international trade at RILA, noted that as the Chinese tariffs drag on, businesses large and small will be forced to restructure their supply chains. Changing the source on products as simple as plastic stickers can take as long as a year, she said.

“The pricing impact won’t hit immediately,” she said. “I think a lot of this uncertainty is about how long these tariffs are going to be in place.”

There’s also the question of whether retailers, embracing a strong economy and shoppers with money to spend, could increase prices anyway. But Cohen said that, even with signs pointing toward a strong holiday season, “the prospect of raising prices across the board is extremely problematic. There’s no getting away with that.”

Still, retailers will have to grapple with questions of when to time price increases on goods that will feel the full brunt of the tariffs at the start of 2019.

“Do you start to adjust prices now or do you wait until January?” Cohen said. “That’s a difficult decision.”

Mark Rosenbaum, department chair and professor of retailing at the University of South Carolina, said that many retailers placed their holiday-season orders over the summer, and that it would be unusual for them to alter the prices now because of the tariffs.

Jack Kleinhenz, chief economist at the National Retail Federation, noted that many of the tariffs apply to goods that have “already been ordered, and have been shipped and are on their way.” The “precise effects of the tariffs are not yet completely clear,” but any impacts are likely to hit closer to the start of 2019. The tariffs may hit prices for jewelry by Valentine’s Day, for example, but that may be the earliest shoppers will feel a difference.

In the meantime, retailers and shoppers will have reason to stay merry.

“Thinking about the ability to spend — the data shows that we are in a good place,” Kleinhenz said. “The picture looks very good.”

U.S. retailer group sees 2018 holiday sales up more than 4 percent

NEW YORK (Reuters) – U.S. holiday sales in 2018 will increase 4.3 percent to 4.8 percent boosted by a strong economy but will be slower than a year ago when consumer spending surged to a 12-year high, according to a forecast from a leading retail industry group.

The National Retail Federation (NRF) said holiday sales growth will be higher than an average increase of 3.9 percent over the past five years but slower than the 5.3 percent growth witnessed a year earlier when consumer spending grew the most since 2005 and was boosted by tax cuts.

“Last year’s strong results were thanks to growing wages, stronger employment and higher confidence, complemented by anticipation of tax cuts that led consumers to spend more than expected,” NRF Chief Economist Jack Kleinhenz said.

“With this year’s forecast, we continue to see strong momentum from consumers as they do the heavy lifting in supporting our economy,” he said.

The combination of more jobs, improved wages, tamed inflation and an increase in net worth all provide the impetus to spend, he added.

The retail trade group said it expects sales for the last two months of the year between $717.45 billion and $720.89 billion, excluding autos, gasoline and dining out. Holiday sales in 2017 were $687.87 billion.

NRF’s forecast is one of the most closely watched benchmarks ahead of the holiday season, when retailers like Amazon.com Inc, Walmart Stores Inc and Target Corp generate an outsized portion of their profits and sales.

The last two months of the year can account for 20 percent to 40 percent of annual sales for many retailers.

The NRF forecast follows other estimates from companies like AlixPartners, which says sales will grow in between 3.1 percent and 4.1 percent as “2017 will be a tough year to follow.” Forecasts from companies like Deloitte and PwC expect holiday retail sales to grow around 5 percent.

NRF also said Wednesday that it expects seasonal employment by retailers to reach between 585,000 and 650,000 jobs, up from 582,500 in 2017.

Cleveland’s economy fails to gain traction

A better job of measuring performance is key to turning around region’s fortunes

Illustration by Daniel Zakroczemski for Crain’s

While there is some question about whether he actually said it and exactly how he said it, business thinker Peter Drucker is credited with a mantra that has wide acceptance in management circles: “You can’t improve what you don’t measure.”

Expanding on that maxim, the need to better measure the strengths and weaknesses of the Northeast Ohio economy, as a prelude to improving it, may end up being a key takeaway from Jon Pinney’s June 8 speech at the City Club of Cleveland. There, the managing partner of the Kohrman Jackson & Krantz law firm pronounced that the Northeast Ohio economy was “dead last or near the bottom in most economic metrics.”

He cited recent national media coverage, such as Forbes’ “Best Cities for Jobs”survey, which ranked Cleveland last out of 71 major metro areas, and Business Insider’s ranking of the country’s 40 best and worst regional economies, where Cleveland also placed last.

As Business Insider reported, Cleveland had the highest February 2017 unemployment rate, at 5.7%, among the 40 biggest metro areas, and its job growth was the second-lowest, with non-farm payroll employment rising just 0.3% between February 2016 and February 2017.

The struggles of the region’s economy are nothing new. Some data make that point when they are periodically announced, such as Census Bureau reports that show the region’s population decline and when the Labor Department announces the monthly unemployment rate.

Pinney was highlighting the need to pay more attention on a regular basis to those and other measurements of the region’s performance and to compare that performance to other regions. He closed his comments by making a “grand challenge” to business and civic leaders to face up to the region’s poor showing when compared to the rest of the country and find solutions to the region’s economic sluggishness.

Before that can happen, however, the region needs better data — data that have not been as readily available in Northeast Ohio as they are in some other areas.

In Columbus, for example, Columbus 2020, the region’s economic development agency, posts on its website updated monthly data on the size and composition of the regional workforce, including a graph which shows if the employed workforce is growing or declining and a pie chart of which industries employ the most people.

It’s a barebones example of what economists call an “economic dashboard.”

Greater MSP, an economic development agency in the Minneapolis-St. Paul region, goes further. Its “Regional Indicators Dashboard” tracks changes in more than 50 economic, environmental and social outcomes and how the region ranks with a peer group of regional economies. It includes everything from average weekly wages to percentage of the population with a college degree to the cost of electricity.

Don Iannone, a Highland Heights-based economic development consultant, produced a dashboard for Ashtabula County after becoming CEO of the Growth Partnership for Ashtabula County in 2014. It provided a wide variety of regularly updated information for several years covering data on employment and business formation in the county.

But because the economy was struggling, business and civic leaders weren’t always happy to see their economic difficulties on display on the internet.

“People didn’t like the bad news. They just didn’t,” he said. But to him, it was a necessary regular assessment. “I said, it’s actually like going in for a physical and the doctor gives you all the news, good and bad,” Iannone said.

In 2005, the Federal Reserve Bank of Cleveland produced an economic dashboard proposal for the Fund for Our Economic Future, a collaboration of foundations and other philanthropies that focuses on regional economic development. The goal was “to encourage and advance a common and highly focused regional economic development agenda that can lead to a long-term economic transformation of the Northeast Ohio (NEO) economy.”

The work, said one economist who worked on the project, was noble, but was overwhelmed by other priorities at the time.

“The great recession had a major influence on how we could approach this activity,” said Jack Kleinhenz, an economist now running Kleinhenz & Associates in Cleveland Heights. “In 2005, the economy started to go in the tank and everybody was preoccupied, I hate to say it, more by survival.”

That effort is being revived.

Earlier this year, the Fund for Our Economic Future released “2 Tomorrows,” a report on the challenges facing the 18-county Northeast Ohio economy. “We are not innovating and investing to the level needed to drive and sustain global competitiveness,” the report stated. “We need to change what we consider success.”

Beyond basic economic concerns, the report focused on the concentration of poverty in the region and on racial inequalities in economic outcomes and challenges to create good jobs and rising incomes across the region.

It also offers a set of measurements to track how well the region is succeeding at meeting those challenges. “What gets measured gets done,” the study argued.

“In ‘2 Tomorrows,’ we put forth what we think is an effective way to measure the economy that looks like the right things,” fund president Brad Whitehead said. “We’ll be doing it quarterly, and it’s an open question whether anyone else will salute it.”

Its measurements look beyond the basic economic metrics and create a “Growth & Opportunity Scorecard” that creates measurements for metrics such as the growth of young businesses, the effort to improve prosperity and how well economic growth is shared across all people in the region.

“We began by thinking, blank slate, what would a successful regional economy look like?” said Peter Truog, director of civic innovation and insight at the fund. He called it an effort to “look at a group of peer cities and see how we stack up.”

Team Northeast Ohio, the regional economic development nonprofit, does gather information on the region’s economy and workforce. While it issues quarterly data to news media, it uses the data primarily to encourage businesses and site selectors considering expanding in the region.

Its president, Bill Koehler, does see the need for greater sharing of the information its researchers gather and would like to see some organization, not his, take a lead role in gathering and sharing that information.

“We need a common place where (this) data resides,” Koehler said. “But even if there is a centralized place where all the data is, we still have to have a common understanding of what the right performance drivers and metrics are, and all of us have to align our strategies around that. It’s not happening enough and people are starting to recognize and challenging those of us in the economic development community to take on the responsibility of doing a better job.”

Toys “R” Us to start liquidation sales; economist says closings don’t represent entire industry

Jack Kleinhenz, Ph.D and chief economist for the world’s largest retail trade association, said while the rash of reported national retail store closings and job losses are real, he wouldn’t say they are a direct indication that the retail industry is moving backward.

“I think there is misinformation or a misunderstanding about the health of the retail industry,” said Kleinhenz, who is also principal and chief economist of Kleinhenz and Associates, a Cleveland-based registered investment advisory firm that specializes in financial consulting and wealth management services.

“We recognize these store closings are happening, but overall we’ve got to be careful to not focus just on store closings because other areas are performing,” he said, noting that in February, according to the Bureau of Labor Statistics, 50,000 jobs were added in retail nationwide including auto sales and gas sales. “If we take out those two categories then, still 46,000 retail jobs were added in the month of February.”

However, according to U.S. Labor Department data, job loss can’t be ignored. Between 2001 and 2016, jobs at traditional department stores fell 46 percent. For perspective, that’s a bigger drop than other troubled industries such as coal mining (32 percent drop) and factory employment (25 percent drop) during the same time span.

MarketWatch reported that in 2017, department stores alone lost 29,900 jobs, while general merchandising stores cut 15,700 workers. In addition, last year’s BLS data also showed retail discharges and layoffs grew to a total of 212,000 nationwide – the highest level in nearly two years.

Kleinhenz said based on all of the area data he’s analyzed and the NRF’s forecast, they still believe 2018 will be a stronger year for retail.

Some department stores are moving toward cost fulfillment centers, while other e-commerce retailers, discount stores, luxury goods, and even some small businesses with specialized niches are growing.

In Northeast Ohio for instance, Amazon is building a fulfillment center in Euclid in what once was a retail strip that included a shuttered Toys “R” Us. The dead mall will be replaced by an Amazon fulfillment center, scheduled to open in 2019.

A similar, but larger, project is under construction and set to open next year in North Randall, where Randall Park Mall once stood. Between the two Amazon facilities, the company will employ more than 3,000 people.

“The landscape is changing and the way the industry is operating is changing. They’re looking to be more cost efficient. Ultimately retailers want to deliver good price and value, which is no different than any other industry,” he said.

“Undoubtedly they’re facing significant competition and consequently they need to change the way they’re operating given the environment.”

RETAIL CLOSINGS

The national retail landscape is changing rapidly with a great deal of upheaval as brick-and-mortar stores continue to struggle to change and adapt in the highly competitive digital age.

Claire’s Chapter 11 bankruptcy filing on Monday, is the latest in a string of mall-based stores shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

But mall-based stores aren’t the only casualties of consumers increasingly more comfortable ordering products online. Toys “R” Us, another company left deep in debt from a leveraged buyout, said last week that it was liquidating its 735 stores in the United States. The bankrupt retailer is closing one-fifth of its U.S. outlets, which could end up being more than 180 stores including locations in Mentor, Western Hills, Dayton and Dublin, Ohio. Liquidation sales were to begin Thursday, but were delayed this morning until possibly Friday or later.

In 2017, nearly 9,000 stores closed across retail sectors. Cushman & Wakefield said that number will be between 10,000 and 11,000 doors this year–and that’s fewer than the 13,000 the analysts initially forecast, thanks in part to Simon Properties’ legal action attempting to block Starbucks from closing Teavana locations.

“Not everyone is shrinking! Off-price apparel, discounters, warehouse club stores and dollar stores will continue to post record growth,” Garrick Brown, vice president of Retail Intelligence for the Americas, said in a January blog.

“Grocery stores and most restaurants will continue to account for growth, even as the weakest concepts will increasingly struggle with a saturated marketplace,” he said.

Still, last year was a record year for both store closings and retail bankruptcies. Dozens of retailers including Macy’s, Sears, and J.C. Penney shuttered thousands of stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy.

The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the U.S., or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant. Chains that have confirmed they will be closing locations in 2018 include Bon-Ton, Gap, Sears-Kmart and Walgreens.

In January, Walmart announced plans to close 63 Sam’s Club stores across the U.S. including one in Cincinnati.

Teen retailer Abercrombie & Fitch is bouncing back by cutting its stores. The New Albany, Ohio-based company was praised by analysts easier this month after it announced positive same-store sales growth in its fourth-quarter results. Same-store sales were up 9 percent overall at the company, boosted by 11 percent growth at Hollister and 5 percent at the Abercrombie brand itself.

But at the same time, the company also announced it would be closing up to 60 Abercrombie and Hollister stores in 2018. Closing store locations have not been identified yet.

By Marcia Pledger, The Plain Dealer

cleveland.com

Retailers are hiring more people. One reason: Home renovations.

The nation’s unemployment rate remained unchanged in February, but there was one bright spot many economists weren’t expecting: an influx of retail jobs.

In all, retailers added 50,300 jobs in February — four times the number from the month before — even as the U.S. unemployment rate stayed steady at 4.1 percent.

One reason for the gains, economists said: Americans are increasingly renovating their homes instead of buying new ones, helping create thousands of retail jobs at companies like Home Depot and Lowe’s.

Building-material stores hired more than 10,000 workers in February to keep up with booming demand, according to data from the Bureau of Labor Statistics. Those positions accounted for more than one-fifth of the total retail jobs added last month.

The gains are part of a larger trend. Building-material and garden supply stores have added roughly 49,000 jobs in the past year.

“This is a housing repair and remodeling story — and not just because of the recent hurricanes and fires,” said Diane Swonk, chief economist at professional-services firm Grant Thornton. “In many cases, people are realizing it’s cheaper and easier to add on to their homes than to buy new ones.”

Low housing supply and high costs, particularly in larger cities, are prompting prospective buyers to think twice before buying a house, Swonk said. Other factors, such as rising interest rates and changes to mortgage-related tax credits, are also contributing to their decisions.

“Add to that the housing stock is older and more decrepit than it used to be, and you’re seeing a boom in remodeling,” Swonk said, adding that she is in the process of replacing the roof on her Chicago-area home.

Homeowners are projected to spend $340 billion on home improvements and repairs this year, up 8 percent from last year, marking the highest increase since before the Great Recession, according to Harvard University’s Joint Center for Housing Studies.

Increased demand is also helping create new jobs, albeit low-wage positions that are often seasonal. Home Depot announced plans to hire 80,000 workers last month, while Lowe’s said it would hire more than 53,000 seasonal employees to prepare for spring.

“What’s striking about these numbers is that they are unaffected by online retail,” said Jed Kolko, chief economist at the online jobs site Indeed. “Most people aren’t buying their lumber or potting soil online.”

But wages remain low: The median pay for retail workers is about $11.01 per hour, or $22,900 a year, according to BLS data.

The jump in employment is a departure from recent months: The retail sector lost 25,900 jobs in December but added 14,800 in January. (Warehouse jobs, which are not counted in the retail figures, grew by about 400 positions in February.)

“I did not expect a large increase in February, in all honesty,” said Jack Kleinhenz, chief economist for the National Retail Federation, a trade group that lobbies on behalf of the industry. “This was a substantial increase at the industry level.”

General-merchandise stores such as Walmart, Target and Costco added 17,700 jobs, while clothing and accessories stores hired 14,900. A number of those newly created positions, economists said, were probably focused on retailers’ growing online and mobile businesses.

Walmart, for example, has hired more than 18,000 personal shoppers in recent years as it builds up its shop-online, pick-up-in-store service, executives said on a Tuesday call with reporters.

“Companies are putting more people on the floor,” Swonk said. “We don’t have a handle on whether they’re hiring for online operations vs. in-store, but we know they’re hiring.”

Abha Bhattarai

The Washington Post