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Weak retail sales and the danger of discounts

Mark Garrison May 13, 2014
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Weak retail sales and the danger of discounts

Mark Garrison May 13, 2014
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(Story updated Tuesday, May 13, 2014; 9 am P.T.)

A new report shows that April’s retail sales increased 0.1 percent. That’s a surprisingly weak report — and follows a strong showing in March, when sales jumped 1.1 percent.

That followed dismal sales numbers earlier in the year, attributed to the nasty winter weather that kept shoppers in many states indoors. Syracuse University retail professor Amanda Nicholson says retailers she talks to are “much more hopeful. People are actually smiling occasionally because the warmth brings people out.”

But nice weather only goes so far in making the sale. Many who follow the retail market are concerned that stores are being forced to aggressively slash prices.

“To get people enticed, it seems to take a lot more effort than it used to,” says Morningstar economic analysis director Bob Johnson.

Now we all love deals, but stores having to resort to massive sales can signal troubling news about shoppers’ lives. If consumers aren’t buying until they see a 50 percent off tag, that could mean they’re still hurting financially.

If consumer hesitancy affects retailers’ bottom lines, stores could cut back on hiring, expanding and investing, affecting the larger economy.

Some retailers may be smiling a little bit more often as they enjoy the sunshine, but there will need to be several months of sustained retail strength before those grins become widespread.

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