Advertisement

The looming retail apocalypse may be postponed in 2018

The looming retail apocalypse may be postponed in 2018
People carry shopping bags outside a mall in New York. (Alba Vigaray /EPA-EFE/REX/Shutterstock)

This year brought us no shortage of harbingers of the retail apocalypse. Mega-chains such as Toys “R” Us, Payless ShoeSource and H.H. Gregg filed for bankruptcy. The likes of Sears Holdings, Gap and Gymboree announced they were shutting hundreds of locations.

But as 2018 nears, retail is better positioned than it has been in a long time to resist impending doom.

Advertisement

That’s partly because Republicans just passed a giant corporate tax cut that President Trump signed into law last week. There is arguably no policy goal for which retailers have fought harder in recent years, and the changes are sure to provide a major boost to their balance sheets.

There are other upbeat signs, too, including that the industry appeared to be cruising to its best holiday season since before the Great Recession.

Forecasts were optimistic coming into the annual shopping blitz, and we’re getting hints the cheer was justified: The Commerce Department reported that November retail sales were up a robust 0.8% from the previous month, blowing past analyst expectations. Online spending has been strong, with e-commerce sales up 14.7% from a year earlier in the early part of the holiday rush, according to data from Adobe Digital Insights.

These holiday-season indicators don’t just matter because they suggest it will be a holly-jolly fourth quarter. They matter because they add to evidence U.S. consumers are in good shape.

During and after the recession, retailers felt forced to crank up the promotions because penny-pinching shoppers wouldn’t spend otherwise. But that has largely faded. Retailers are broadly facing a more receptive audience.

And perhaps most importantly, we know the retail curse is avoidable because we’ve seen some remarkable turnarounds in 2018. The stock of Walmart Stores remains close to the all-time high it hit in November, when the retailer announced its strongest quarterly U.S. comparable sales growth in eight years.

Remember when it seemed like McDonald’s Corp. and Olive Garden were going to be decimated by the fast-casual dining trend? Yeah, not so much. Both chains are sizzling, proving that — surprise! — people will buy cheeseburgers and never-ending pasta even in these health-conscious times if the price, taste and customer service are right.

And it’s worth noting that insurgent retailers, too, are finding a way to get traction. At Home, a furnishings and decor chain, has expanded rapidly to 144 stores and, in the latest quarter, saw its comparable sales increase a strong 7.1% over a year earlier.

Of course, it’s still tough out there for retailers, and we will doubtless see more bankruptcies and store closures. But retailers are playing with a much better hand than they had in the recent past. It’s up to them to make the most of it.

Advertisement
Advertisement