Retailers Suffer as Consumers ‘Struggle to Make Ends Meet’
Consumers are spending heavily at Saks. They are spending less at Family Dollar and Tractor Supply. So goes retailing in rural America.
Family Dollar Store reported this week that November sales were lower this year than last, 3.4 percent lower than during the same period in 2006. The company said there wasn’t a problem with their stores. The problem, according to the five-and-dime style retailer, is that poorer people are having financial trouble.
"Macro-economic pressures continue to impact the spending capacity of low and low-middle income consumers. As our customers struggled to make ends meet in the first quarter of fiscal 2008, we saw sales increases in most consumable categories while more discretionary categories were softer," said Howard R. Levine, Chairman and CEO.
Family Dollar is describing a general problem with rural retailers, and, consequently, with rural retail companies in the Yonder 40 stock index. The Yonder 40 is an accumulation of stocks meant to mirror the rural economy. What the 40 is saying is that over the past six months, retailing in rural America for moderate income customers has been lackluster.
The stock price for Tractor Supply (“The stuff you need out here”) is down by more than 22%. Wal-Mart is up barely. Cabela’s is down more than 28%. And the three clothing-type stores in the chart above are all down more than 20%.
The stock price for Family Dollar is down 41% since July 1. Stage Stores (which operates Bealls) is off 22% and Cato Stores (which specializes in women’s clothing) is down 34%.
Meanwhile, however, higher end stores are doing better than expected. The Wall Street Journal reported that “high-end department stores surprised even optimists who had expected a rebound after months of weakness. Saks Inc., the segment's best performer of late, posted a 26% increase in November same-store sales”¦”
Sales at the stores catering to more wealthy customers are doing better than forecasts called for.
Nobody is expecting a quick turnaround in the stores for middle-income buyers. "We currently expect this merchandise mix trend to continue through fiscal 2008 as customers cope with an increasingly challenging macro-economic environment,” said the Family Dollar CEO. “Consequently, we now expect that comparable store sales will be flat to up slightly in fiscal 2008″¦”
Does this mean that rural incomes — especially incomes of “low and low-middle consumers” — will continue to suffer throughout 2008? The Yonder doesn’t know. But the markets are saying the dollars aren’t going to be there to boost rural retail stocks.
The full Yonder 40 was up almost 2 percent this week, matching the rise in the Dow and bettering the up tick in the S&P 500 and NASDAQ. Only 12 of the 40 stocks in the Yonder index fell in the first week in December. And, yes, Family Dollar led those with loses with a 13 percent drop in value.
There was some news from the companies in the Yonder 40:
“¢ Mid American Energy, a subsidiary of Berkshire Hathaway, is looking seriously at plans to build a nuclear power plant in Payette County, Idaho. The company has picked a site for the plant on 3,000 acres of pastureland northwest of Boise. Mid American is still studying the proposal. It would be Idaho’s first nuke.
“¢ConAgra reported higher than expected earnings for the quarter ending November 25.
“¢ Milk prices appear to have peaked, which is good news for Dean Foods, which has been saying for some time that high milk prices have hurt profits. Dean reports that farmers are responding to higher prices by producing more milk. The increased supply is expected to moderate prices.