Retail numbers mixed, affluent shoppers pull back

Retail sales in June held more bad news for Recovery Summer.  The Associated Press called the numbers “tepid” in its first report on the RetailMetrics analysis of reporting figures from major retailers.  Sales were “sluggish” for everyone — and the people with more money than most began keeping their hands in their pockets.

First, the overall look at retail activity last month:

Americans didn’t go on many shopping sprees in June, resulting in sluggish sales for many retailers. It often took deeply discounted clothing to get shoppers to spend — and then only if they needed it.

The lackluster performance, being compared with a weak June 2009, is raising concerns about the back-to-school shopping season and the health of the economic recovery.

After ramping up spending surprisingly in the first quarter, shoppers have hunkered down since April. Some worry they’ll continue to be tight-fisted through the holiday shopping season.

June usually brings out the discounts, especially in clothing stores, as retailers prepare for fall and winter and the upcoming school season, so discounts are nothing new.  To move inventory this June, though, retailers had to cut prices very low and lost ground as a result:

June is a time when stores clear out summer goods to make room for back-to-school merchandise. But analysts say discounting was heavier than expected as stores had to work hard to pull in shoppers continuing to grapple with a deluge of financial issues. Such deeper-than-planned discounting resulted some stores, including American Eagle Outfitters and Wet Seal, trimming profit forecasts Thursday.

Clothing stores accelerated discounting toward the end of June after not getting enough business, BMO Capital Markets analyst John Morris said. He estimated that volume and level of discounts at the mall-based apparel chains he tracks was even with a year ago even as stores carry less inventory than a year ago. Discounting was down 5 percent in May from a year earlier, after being down 10 percent from February through April, Morris said.

In a surprising turn, even those with plenty of cash have started cutting back on spending.  The later AP analysis, published at CBS, shows that luxury spending dropped sharply in June just as the summer season got underway:

Affluent Americans went back to tightening their belts in June after months of showing other shoppers how to spend, raising concerns for the overall economy.

Data released late Wednesday by MasterCard Advisors’ SpendingPulse shows luxury spending dropped in June for the first time since November. …

The 3.9 percent decline in luxury spending from a year earlier is particularly worrisome because the well-heeled – households with annual incomes in the top 20 percent, about $158,000 on average – account for almost 40 percent of overall consumer spending.

And a downtrend in luxury spending, which excludes jewelry but includes upscale clothing, accessories and restaurants, could signal trouble for retail and in turn for the broader economy. Consumer spending – including such major expenses as health care – makes up about 70 percent of U.S. economic activity.

With Recovery Summer quickly turning into the WIN buttons of 2010, the Obama administration has become desperate to incentivize consumer spending.  How desperate?  They have the biggest retailer in the country arranging SBA loans to get consumers to open their wallets:

Tired of waiting for spending to rebound on its own, retailers are taking matters into their own hands. Stores like Sam’s Club, Target, Toys “R” Us, Staples and Office Depot are offering unconventional promotions meant not only to attract visitors to stores, but also to get them feeling profligate.

Sam’s Club is introducing a program in which it facilitates loans for shoppers of up to $25,000, backed by the Small Business Administration. Target will give its credit card holders 5 percent discounts. Toys “R” Us is instituting a holiday fund program where it adds to shoppers’ savings, and Staples and Office Depot are giving away office products for a penny or at no cost. …

Of the over-the-counter stimulus plans, the one at Sam’s Club is the most unusual.

Sam’s began testing the program in May and will soon start marketing S.B.A. loans of $5,000 to $25,000 for its members nationwide. Superior Financial Group, which is managing the loans, gives Sam’s members a $100 discount on the application fee, and lower interest rates, because of how much business it expects through the arrangement.

The company says it does not expect the program to be a big moneymaker, though it earns $50 for each financed loan. The point is to get customers spending more freely — and, it hopes, spending at Sam’s Club.

Sam’s Club is a subsidiary of Wal-Mart.  Yes, that Wal-Mart, the bête noir of the Left, the eeeeeeeevil capitalist juggernaut that Democrats routinely attack in order to build populist points.  The Obama White House must feel quite a bit of desperation to partner up with Wal-Mart, and this program sounds pretty doggone desperate.  Is it really so hard to give out SBA loans that the government needs to discount them through Sam’s Club?  And do you have to get 12 loans at a time and carry them out in the flatbed cart?

Update: King Banaian is more optimistic after reviewing the raw data.