Earnings in the retail sector are poised to drop 6.8 percent in the first quarter compared to the first quarter of last year, according to data from Retail Metrics obtained by Retail Dive.
If indeed retail earnings fall about 7 percent, it would be the largest decline since the fourth quarter of 2013, when earnings fell 7.1 percent. Retail Metrics president Ken Perkins called it a “cruel” quarter for the industry, which has been rocked by bankruptcies and a rash of store closing by nationwide retailers. The projection excludes earnings from Wal-Mart Stores Inc. (WMT).
Retail’s growing list of bankruptcies this year already count Wet Seal, BCBG Max Azria, Payless ShoeSource, Gordmans Stores and HHGregg. Other retailers like Macy’s Inc. (M), J.C. Penney Co. Inc. (JCP) and Abercrombie & Fitch Co. (ANF) are planning store closures to reduce costs. And still others are trying to find innovative ways to keep consumers in their stores, as Staples Inc. (SPLS) is doing with its new workspace stations. (See also: Staples Pivots from Office Supplies to Office Space.)
Part of the problem for brick-and-mortar retailers is that more consumers are shifting their shopping habits to online, but another part is that retailers have not evolved their stores quickly enough, according to a GlobalData Retail report. (See also: U.S. Retail Sales Slid in March.)
"[W]hile there is no doubt that online has played a major role in changing shopping habits, it does not bear sole responsibility for the fall in the popularity of physical shops,” GlobalData Retail analysts said in a report, according to Retail Dive. “Physical shops and destinations must, on balance, accept more of the blame because of their failure to evolve and provide the shopping experience people want.”
The SPDR S&P Retail ETF (XRT) is down 5.5 percent year to date, and down 8.1 percent the past year.