April retail sales fall flat as mall stores close in droves

US retail sales were flat in April, according to the Commerce Department. Consumers simply aren’t parting with their money as easily as they used to, which has left one segment of the retail industry reeling: stores in or near America's shopping malls. 

Warmer weather and a bounce back in hiring wasn’t enough to urge American consumers to open up their wallets last month, another sign that spending is stuck in the doldrums even as the rest of the economy improves. Feeling the pinch, many US retailers – particularly those traditionally seen in America's malls – are closing stores by the hundreds. 

US retail sales were unchanged at  $436.8 billion in April, according to data released Wednesday by the Commerce Department. Coming off the heels of a strong March, economists had expected a slight uptick, somewhere between 0.2 percent and 0.4 percent. Overall, sales have increased less than 1 percent since April of last year.

In particular, consumers scaled back purchases of big-ticket items like automobiles and furniture, which fell 0.9 percent and 0.4 percent, respectively. 

The results echo earlier evidence that the consumer economy in the US has yet to kick into gear. GDP barely grew in the first quarter of 2015, and key measures of how Americans were feeling about the overall economy hit their lowest levels in several months. Consumer spending – a wider measure of buying activity that makes up around 70 percent of overall GDP – increased in March, but only after three straight months of declines.

“We are left with the latest iteration of these data being weaker than expected,” MFR, Inc. economist Joshua Shapiro writes in an e-mailed report. “In the reverse pattern of the employment data, retail sales were weak in April after a robust March."

As the Monitor has previously reported, a much-improved employment picture and higher wages have thus far failed to translate into a pickup in spending. Consumers simply aren’t parting with their money as easily as they used to when the economy looked rosy, opting instead to boost their savings and pay down debts. That has left one segment of the retail industry reeling: stores in malls. Once the central nervous system of shopping in America, traditional indoor malls (along with all retail spaces) have seen their foot traffic take a nosedive over the last five years. Analysts estimate that half of US malls will close over the next two decades, as consumers increasingly choose to shop online.

Some retailers are making up the difference with an increase in web-based sales. Best Buy, for example, saw a double-digit increase in its online sales this past holiday season. But the dropoff has already made casualties of other mall-based chains. Clothing chain Wet Seal abruptly declared bankruptcy earlier this year, shuttering hundreds of stores in the process. RadioShack declared bankruptcy in February, and what’s left of the brand was auctioned off to a hedge fund Wednesday. Abercrombie & Fitch, American Eagle, and Jones New York are just a few chains slated to close over 100 stores within the next few years. Department stores that have traditionally anchored malls, like Sears and JCPenney, have also seen business dwindle.

“The days of strolling the mall have waned,” says Chuck Tatelbaum, a bankruptcy lawyer focusing on the retail industry based in Ft. Lauderdale, Fla. “People are shopping less, and they’re very careful with what they are spending.”

Store closures can have a ripple effect within the mall ecosystem, he says. “You lose the impulse purchases, too. Take a pretzel store. No one is going to make a trip specifically to buy a pretzel, they depend on the mall traffic.”

Some stores are finding ways to adapt. Macy’s for instance, has avoided the fate of other midrange department stores by successfully growing its online business while concurrently retooling its stores. Instead of sending the same merchandise everywhere, Macy’s stocks its stores based on very specific consumer preferences in each location. Despite today’s first-quarter earnings miss, it has been a winning formula over the years. Overall, however, it’s a lean time for retail, even as it’s getting not quite so lean for the American shopper.