Overheard on Wall Street: The Buzz on Lackluster Retail Sales

Americans are holding on to their greenbacks. Even with gas prices lower than they’ve been in years, consumers simply aren’t pumping those extra bucks into footwear, apparel, electronics or even their cars for that matter.

After a slew of flat earnings releases, industry insiders say there simply isn’t one factor that adequately explains the sluggish market. While some companies, such as Nordstrom Inc., can chalk up losses to acquisition costs and other investments, experts say a confluence of factors are likely to blame for the slowdown in consumer spending and company’s profits, by extension.

For the last two quarters, it’s been the same song for footwear companies and department stores alike: weather, a stronger dollar and the West Coast ports are hurting margins.

“I wouldn’t read too much into the macro trends, there were mitigating factors,” explained Morningstar analyst Paul Swinand, adding that such factors include the recurring issues of dismal weather and the ports as well as tough year-over-year comparisons.

Macy’s Inc., for example, saw its profits decline 14 percent in the first quarter, ended May 2, 2015—much of which management attributed to lingering West Coast port issues, the dollar’s rise and unseasonable weather. Similarly, Ralph Lauren—which took a 19 percent earnings hit in the most recent quarter—pointed to foreign exchange pressure for its losses while Kohl’s Corp. took a hit on weather and the West Coast strikes.

American consumers, however, are relatively unconcerned when it comes to the dollar’s strength—when was the last time you declined a pair of patent leather pumps because the foreign exchange market was too volatile? And, the West Coast ports issues have been all but laid to rest while weather has generally improved in most places.

So, there has to be a better explanation on the part of consumers.

“Consumers have been beaten down since 2009, so they are understandably skittish,” explained Swinand of recession-recovering shoppers. “But, to me, the economy should continue to improve this year. [Consumers] saved the gas savings so the rise in gas shouldn’t matter.”

B. Riley & Co. analyst Jeff Van Sinderen added that weak product offerings also contribute to consumers’ apparent frugality.

“If the merchandise is not “must have” and everyone is discounting, there is not much urgency and the consumer can take their time to find the best deal on ‘so-so’ merchandise,” said Van Sinderen.

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