World Class Faculty & Research / November 20, 2015

The Retail Blues

Here's good news if you're looking for discounts, bad news if you're in the retail industry: Third quarter 2015 was brutal for much of the retail sector. After Macy's reported that same-store sales were down 3.6 percent, its stock had its worst day in six years. Nordstrom also missed earnings targets and saw a one day sell-off of 20 percent. Urban Outfitters — which, oddly, recently acquired a pizzeria chain — Dillard's, and other big-name retailers also reported disappointing numbers.

Overall, consumer spending at retailers rose 1.7 percent from October 2014 to October 2015, down from a 4.7 percent increase over the previous 12-month period. Warm fall weather in the Northeast was one explanation for the falloff in store traffic, as it might have led some people to delay buying winter clothes. But the bigger mystery is why few people used the windfall from low gas prices to splurge on themselves or their families. "People are saving at the pump, and retailers expected that they would spend some of those new funds on clothing and other 'softer' goods," says P.K. Kannan, chair of the marketing department at the Smith School. "They let their inventory levels creep up quite a bit."

What seems to have happened, he suggests, is that consumer used the extra money on relatively big-ticket items like smartphones and home repairs (Home Depot was a rare bright spot on the retail scene), and put off purchases of those soft goods Walmart also did well, demonstrating that its patrons view it as a place to buy necessities and not extras.

Some commenters asserted that you could sum up retailer's woes with one word: Amazon. But Kannan points out that the growth in online sales has actually been slowing since 2012, and that e-commerce still accounts for less than 8 percent of all sales. Nor are clothes a major focus of Amazon — yet.

Retailers can't count on Christmas to bail them out because now they have lots of stuff to unload at a discount, which will hurt their fourth-quarter numbers

Media Contact

Greg Muraski
Media Relations Manager
301-405-5283  
301-892-0973 Mobile
gmuraski@umd.edu 

About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Back to Top