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Lake-Lehman’s proposed budget includes 3.1 percent tax hike

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POLICE BLOTTER

<p>NEW YORK &#8212; It&#8217;s starting to look a lot like the Great Recession redux for retailers.</p><p>More than twice as many stores have closed this year than at the same point last year. Bankruptcies are far outpacing last year&#8217;s rate. Retailers slashed jobs at the sharpest pace in seven years this spring. And retailers collectively could report the biggest drop in first-quarter profits since 2009.</p><p>This time, the culprit&#8217;s not the economy but shoppers whose habits have changed profoundly and permanently, as they shop online more and look for deals. The results this week from department stores like Macy&#8217;s, Kohl&#8217;s and J.C. Penney are expected to illustrate the latest damage by the spending shift and the dominance of Amazon.</p><p>&#8220;The first-quarter reports will show how difficult the mountain retailers will have to climb,&#8221; said Ken Perkins, president of research firm Retail Metrics LLC. &#8220;Things are far better from an economic perspective than before when the sky was falling.&#8221; But he says people are increasingly spending on experiences and shopping on phones and tablets, &#8220;and stores are facing pressure from off-price stores and Amazon.com.&#8221;</p><p>Perkins estimates that the 114 retailers he tracks will see an average drop of more than 5 percent in first-quarter earnings, marking the second straight quarter of declines and third in the last six quarters. But he thinks there&#8217;s even a chance they could surpass a 7.1 percent drop in the fourth quarter of 2013 that would make it the worst quarter since 2009. Moreover, 22 percent are expected to post losses, the highest percentage since the second quarter of 2009. And he forecasts that nearly half of the retailers will see total sales revenue fall, nearing the level of the last downturn.</p><p>The bad news for retail has been relentless of late: The Limited closed all its remaining 250 stores. Payless ShoeSource is shuttering nearly 400 stores as part of its bankruptcy reorganization. Others chains that have shuttered all their stores or retrenched include Abercrombie &amp; Fitch, BCBG and Wet Seal. Mall anchors like Macy&#8217;s and J.C. Penney are closing locations. And Sears Holdings Corp. has said there&#8217;s &#8220;substantial doubt&#8221; about its future, though it has insisted that its actions to turn around its business should help reduce that risk.</p><p>Perkins believes the rash of store closings and job cuts will be a minor burden on the economy. The vast majority of retail workers are paid less than the hourly average earnings per hour of $25, so the impact is far less than losing higher-paying manufacturing jobs, he says. But Frank Badillo, director of research at MacroSavvy, believes the effect will be wider.</p><p>&#8220;The economic effects tend to reinforce the widening income equality and redistribution that favor &#8216;haves&#8217; over &#8216;have nots&#8217;, professional class over the working class and urban over rural,&#8221; Badillo said.</p><p>Shoppers like Martha Shaughnessy, 38, are changing the landscape. The San Francisco resident says she does about three-quarters of her buying &#8212; from household goods to clothing &#8212; online or from her phone. She says even four years ago it was less than half. She likes Instacart for groceries, places like Zulily for clothing for her two toddlers and Everlane.com for clothes for herself.</p><p>&#8220;There are certain things like mobile payments that have made it easier to shop online than in person,&#8221; she said. &#8220;It&#8217;s rare I go to the mall. It&#8217;s more of an occasion than a habit.&#8221; She also says she&#8217;s discovered new brands online.</p><p>The National Retail Federation, the nation&#8217;s largest retail trade group, is sticking with its annual sales growth forecast of 3.7 to 4.2 percent over 2016. But that includes a hefty expected bump of 8 percent to 12 percent from online and other non-store business.</p><p>Matthew Shay, the group&#8217;s CEO and president, says consumers are in good financial shape given a healthier job market and other economic factors, but acknowledges the industry is more turbulent. He points to bright spots like home improvement chains and off-price retailers like TJX Cos., which are still expected to have strong results.</p><p>&#8220;Retail is not in any long-term danger,&#8221; Shay said, but &#8220;the pace of change is accelerating.&#8221; He says stores need to dramatically step up their investments in e-commerce.</p><p><ins>Department stores have pledged to do better and adapt, expanding their exclusive merchandise and beefing up their online services. But they and other clothing-dependent stores have struggled to prove themselves to shoppers.</ins></p><p><ins>The clothing sector may be at a tipping point when it comes to online shopping for that category. Cooper Smith, an analyst at research firm L2, estimates that about 18 to 22 percent of clothing sales will be online this year. That&#8217;s a critical juncture. His research and that from firms like Boomerang Commerce shows that when online penetration in a merchandising category hits 20 percent, that&#8217;s when Amazon steps up its game to seek more of that market. Analysts say one example is what happened when consumer electronics hit that threshold around 2005, and the liquidation of chains like Circuit City followed.</ins></p><p><ins>Amazon has made a big push into clothing in the last two years, expanding its offerings of high-volume items like bras, socks, and men&#8217;s dress shirts where shoppers don&#8217;t care about brand names.</ins></p><p><ins>&#8220;2017 will be the year that apparel e-commerce takes off,&#8221; said Smith, though he doesn&#8217;t believe the online portion of clothing sales will go higher than 35 percent for reasons that include people liking to try stuff on.</ins></p><p><ins>Shaughnessy says that while shopping at Nordstrom &#8212; where she says she still likes to go and has good experiences &#8212; she saw a dress she liked but didn&#8217;t try it on. She later went back with her 19-year-old stepdaughter and bought it.</ins></p><p><ins>&#8220;I hadn&#8217;t stopped thinking about it,&#8221; she said. &#8220;And it was a brand I hadn&#8217;t bought before so I didn&#8217;t know my size, and a new style for me. So I wanted human affirmation that it looked OK.&#8221;</ins></p><p><ins>Stores need to make sure they deliver a better experience when online shoppers come in, says Steve Barr, PwC&#8217;s U.S. consumer markets leader. Many don&#8217;t even have clear signs for online shoppers who come in to pick up online orders.</ins></p><p><ins>&#8220;Retailers are failing to walk in the shoes of the customer, and making it a user-friendly experience,&#8221; Barr said.</ins></p><style>
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<div class="neCaption">Shoppers head to a J.C. Penney store in the Georgia Square Mall in Athens, Ga. Retailers&#8217; first-quarter earnings reports are expected to show challenges that stores face as they struggle with shoppers&#8217; accelerating shift online and increasing competition. It&#8217;s happening at a time when stores are shedding jobs at the fastest pace since 2009 and closures are expected to surpass the number during the Great Recession. </div></div><div class="metaInfo"><photo0>https://www.timesleader.com/wp-content/uploads/2017/05/web1_116492635-92e9ea944908453397cf2b44a48fe1f8.jpg</photo0><caption0>Shoppers head to a J.C. Penney store in the Georgia Square Mall in Athens, Ga. Retailers&#8217; first-quarter earnings reports are expected to show challenges that stores face as they struggle with shoppers&#8217; accelerating shift online and increasing competition. It&#8217;s happening at a time when stores are shedding jobs at the fastest pace since 2009 and closures are expected to surpass the number during the Great Recession. </caption0><photoCredit0></photoCredit0></div></div>
<div class="metaInfo"><bylineMeta><p>By Anne D&#8217;Innocenzio</p><p>AP Retail Writer</p></bylineMeta></div>

Stores face biggest challenges since recession