From The Wall Street Journal:
U.S. lockdowns to contain the coronavirus pandemic prompted record monthly drops in retail spending and industrial output, as consumers pulled back sharply on shopping and eating out and factories suffered a sharp drop in demand.
The Commerce Department on Friday said retail sales, a measure of purchases at stores, at restaurants and online, fell a seasonally adjusted 16.4% in April from a month earlier. The drop eclipsed a revised 8.3% drop in March sales, and marked the steepest month-over-month decline in records dating to 1992.
The Federal Reserve separately said industrial production dropped 11.2% in April, its steepest monthly fall on records dating back more than a century, as the coronavirus response closed factories, sapped demand and froze supply chains.
“They’re just dramatically weak numbers,” said Jim O’Sullivan, an economist at TD Securities. “We’re obviously in this big hole now.” He said a key question is how long it takes to climb out of it, which depends in part on the speed of reopening.
Social distancing, business closures, travel restrictions and other disruptions that started in mid-March have taken a particularly heavy toll on retail stores and restaurants, many of which remain closed or are opening gradually as states begin to reopen their economies.
Consumer spending in April was down more than 20% from the same month last year, and certain categories posted dramatic declines. Clothing-store sales in April were nearly 90% lower than a year earlier, while sales at department stores, bars and restaurants, and sporting goods stores were all down nearly half. By contrast, sales were up over 20% on the year for online retailers and up 12% at food and beverage stores.
Lower vehicle sales and spending at bars and restaurants drove last month’s decline in retail sales, but nearly every other category suffered too as commuters worked from home and malls remained shut.
The exception were sales at nonstore retailers, a category that includes internet merchants such as Amazon.com Inc. and which grew 8.4% month-over-month.
. . . .
Sales were weak across a range of categories, but nonessential businesses were particularly hard hit. Sales at furniture stores dropped 58.7% and electronics fell 60.6%. Clothing sales plummeted 78.8% from March.
. . . .
Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending.
. . . .
Workers also are losing jobs in record numbers because of the coronavirus pandemic, another factor hitting consumer spending. And declining consumer sentiment has economists worried about how quickly people will return to spending, as the economy opens back up.
. . . .
Some retailers are also unlikely to weather the pandemic and face permanent closures.
“2020 is going to be a year of rebalancing,” said Under Armour Chief Executive Patrik Frisk during an earnings call Monday. The athletic-apparel retailer reported that about 80% of global business has been at a standstill since mid-March, and revenue may drop as much as 60% in the second quarter.
Retailers on both sides of the Atlantic are “trying to figure out how fast they can open and how fast the consumer is going to come back,” Mr. Frisk said.
Link to the rest at The Wall Street Journal (PG apologizes for the paywall, but hasn’t figured out a way around it.)
PG hasn’t seen any information from major business publications about Big Publishing, Barnes & Noble and other parts of the publishing establishment.
His guess, as mentioned previously on TPV, is that Barnes & Noble will experience a substantial financial impact and that its online business won’t be nearly large enough to materially offset the costs of cutting off its retail arm for an extended period of time.
At least some B&N stores located in malls will have problems if major mall tenants close and/or the foot traffic they generate is substantially diminished. If a mall shuts down, as many malls have done in the recent past, there is likely to be one fewer Barnes & Noble store in the vicinity.
A year from now, PG believes there will be substantially fewer Barnes & Noble stores than their were pre-corona. Ditto for a great many other physical bookstores. He suspects this is the type of major societal and financial upheaval that changes some habits and institutions on a permanent basis.
Unfortunately, PG believes a number of small traditional publishers won’t be able to reopen or will reopen with substantially reduced staff and much-reduced advances.
PG suspects that traditional publishing will see mixed results with bookstore declines offset to some extent by improved Amazon sales. It’s pure speculation on PG’s part, but he would guess that Amazon sales of ebooks from traditional publishing will have seen an uptick while the market share of hardcopy books may decline.
In the short run, an increased proportion of ebook sales, which involve no costs for warehousing, shipping or returns of unsold hardcopy books from physical bookstores may well increase the profit margins of traditional publishers even as, if PG is correct, gross sales revenues suffer steep declines.
Over a longer period of time, if readers under lockdown have sampled ebooks from Amazon or their local libraries to read on their own electronic devices (or devices purchased from Amazon for the purpose), PG suspects some proportion of this group will become permanent ebook aficionados.
It may be too much to expect, but PG would hope that those in traditional publishing with any business sense would put a stop to the childishly petulant attitude displayed toward Amazon by so many New York publishing drones and their associated literati. Absent Amazon or someone like Amazon, traditional publishing’s future would look a lot more like Barnes & Noble’s than is the present case.
PG predicts that, ten or twenty years from now, intelligent and informed individuals will have concluded that Amazon saved literature (and a bunch of jobs in the literature biz that don’t involve writing books) during this difficult time.