Yesterday I opined that Next’s results were a point of reference for how the British high street will fair in 2017.
Let’s just say that its not a bed of roses.
It now appears that US consumers are also feeling the pinch with results out for both Macy’s and Kohl’s both of whom have slashed earnings forecasts for this year.
Kohl’s and Macy’s Christmas sales fell 2.1% and Macy’s announced that it will close 100 stores to concentrate on its best selling locations and streamline operations with a focus on online retailing.
10,000 people will lose their jobs.
All this follows on from the likes of Wal-Mart who closed more than 100 US stores in 2016 and paid $3 billion to acquire online retailer Jet.com.
Many have blamed the rise of Amazon and other online sales; Mastercard estimated that e-commerce spending jumped 19% throughout the Christmas period, compared with an overall 4% increase in retail spending.
Analysts in the US however are still optimistic and generally expect the Christmas period to be a strong one for U.S. retailers, helped by higher wages, lower gas prices and rising employment.
The National Retail Federation, for instance, expects retail sales increased 3.6%, more than the 3% gain of a year ago but much of it having been transacted online.
I’m not convinced and I could be wrong but I see the US consumer like that in Britain becoming more frugal due to not only the recent rise in interest rates but also the Fed’s strong hint of further rises in 2017.
There is a high degree of uncertainty both on rate rises and the spending plans that Trump is expected to introduce makes things more complicated than the UK but a I feel a squeeze is coming.
Wal-Mart, even with its massive transformation and pivot into online retailing has slashed earnings guidance through to fiscal 2018 – could this be the results for other retailers who are late to the online retailing party?