Retailers and restaurants the only losers - so far - as Clinton and Trump slug it out
Published 10/10/2016 | 02:30
It's usually the weather. Now there's a new excuse that US retailers and restaurants are floating to explain their lacklustre results.
It's the election, stupid.
To hear retail executives tell it, the battle for the presidency between Republican Donald Trump and Democrat Hillary Clinton is causing Americans to put off buying everything from romance novels at Barnes & Noble and jeans from the Gap to burritos at Yum! Brand's Taco Bell. They might even be delaying wedding engagements, not good news for companies like Signet Jewellers Ltd.
"The preoccupation with this election is keeping them at home, glued to their TVs and at their desktops," said Len Riggio, the founder and chief executive officer of Barnes & Noble. This election is "unprecedented in terms of the fear, anger and frustration being experienced by the public."
Retailers and restaurants have used a handful of well-worn excuses over the years with varying levels of legitimacy. There's the usual culprit, the weather, and shifts in the calendar, such as Easter coming early. Now they've added presidential politics. That explanation had some validity four years ago because the backdrop of the campaign was the so-called fiscal cliff that was due to usher in large tax increases and government spending cuts, says Ken Perkins, president of researcher Retail Metrics.
Presidential campaigns have often created uncertainty in corporate boardrooms. Business executives worry about what will happen to fiscal policy, trade and government spending. But it's dubious to assume that such concern is filtering down to the middle class, even if this is a "wacky" campaign, according to Perkins. Meanwhile, some measures of US consumer confidence are the highest in nine years.
"They are reaching," Perkins said. "I don't think it's affecting moms as they go out and do their weekly shopping. If it's something you do on a regular basis, you're going to stop doing it because you're worried about which candidate is going to win? It doesn't seem to be affecting Amazon's sales."
Even with rising consumer confidence and job gains, many large retailers are posting disappointing results. In the most recent quarter, only 49pc of US chains increased same-store sales, the lowest mark since the recession in 2009, according to Retail Metrics.
McDonald's, the world's biggest restaurant chain, cited the election in July, when the Democratic and Republican conventions dominated the news.
"There's just a broader level of uncertainty in consumers' minds at the moment, both trying to gauge their financial security going forward, whether through elections, or through global events, people are slightly mindful of an unsettled world," ceo Steve Easterbrook said. "And when people are uncertain, when families are uncertain, caution starts to prevail and they start to hold back on spending."
His counterpart at Wendy's, Todd Penegor, said that "there is a lot of uncertainty in the consumer' s mind as we work through the election".
Richard Ausick, president of retail for Caleres, which operates Famous Footwear and Dr Scholl's felt that the election "has an impact on the customer, particularly what we're talking about - it being as intense and negatively toned as it has been.
"It's probably only going to get worse. That just leaves people concerned about what's going on."
Yum ceo Greg Creed echoed those sentiments, saying: "It goes without saying that people are sort of trying to decide who to choose, and what the impact will be on the economy. People may be hunkering down a little bit." (Bloomberg)