Retailers still cautious about future

Wal-Mart employee Michelle Triplett stocks items in the food area of a Wal-Mart in Chicago

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Kai Ryssdal: When you skim the headlines, it's easy to get just a partial picture of what the news really is. That goes for politics and the style section, and it definitely goes for business news. A lot of companies have had good things to say about first quarter profits. Just today, the world's biggest retailer, Wal-Mart, reported a 10 percent jump in earnings. A record quarter, in fact. But the company also attached a note of caution to that announcement, saying its customers are still concerned about their personal finances. Other retailers have been raising similar red flags.

So we asked our senior business correspondent Bob Moon whether people ought to start worrying again.


Bob Moon: "The consumer is no longer in hiding." That was the confident assessment from the head of JCPenney the other day, but it was quickly tempered with this: "They are being very pragmatic." The forecast Penney's rival, Kohl's, and from Lowe's, the home improvement chain, has also been muted. At Urban Outfitters, on the other hand, CEO Glen Senk was downright blunt.

Glen Senk: I do not believe we are out of the woods. I am not optimistic about the nature of the economy. I think there are many positive signs, but I think this is going to be a slow and lengthy recovery. We are not overly confident about our business. I think we're doing a good job, but it's not easy.

But if profits are rising, why are retailers so glum? Doug Hart has been researching that question at the business consulting firm BDO. He says businesses are worried that credit is still tight and wages remain flat, which limits what consumers are able to spend.

Doug Hart: The savings rate, which had been increasing for several months, has started to decline recently. And I guess the retailers look and say, "That can only go on for so long."

The fact consumers are spending some gives Economist Joel Naroff hope they could be priming the economic pump. But unless it leads to more hiring soon, their spending could be tough to maintain.

Joel Naroff: We really need the middle-income households to be out there being comfortable about the future, having their confidence rise, having their wages rise and spending.

Naroff says it underscores what economists have long cautioned: The recovery will be slow. And possibly slower still, he says, if it causes nervous retailers to hold back.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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