The confidence of consumers in the mid-term performance of the U.S. economy has declined, placing more pressure on retailers like Walmart and Target that have been struggling since the beginning of the fourth quarter of 2018.
Hope For 2019
This week, the Conference Board disclosed that the index of U.S. consumer confidence declined from 136.4 points to 128.1 points, within one month.
Lynn Franco, the director of economic indicators at the Conference Board, said that the economy has weakened due to a variety of factors including the trade war between the U.S. and China.
But, throughout the foreseeable future, the economist noted that the economy of the U.S. could continue to grow at a consistent pace.
Expectations regarding job prospects and business conditions weakened, but still suggest that the economy will continue expanding at a solid pace in the short-term.
Walmart, Tiffany & Co., Target, and other major retailers in the U.S. fell by over 20 percent on average in the last quarter of this year. From its highest point on November 9, the stock price of Walmart, which has been the best performing retailer in the U.S., plunged from $105.5 to $85, by just under 20 percent.
Target, in contrast, suffered a 30 percent drop in its stock price, struggling to compete with Walmart.
Despite the poor performance of major retailers, Tim Quinlan, a Wells Fargo economist, said that retailers are expected to end 2018 on a good note and extend a positive sentiment across the first quarter of 2019 due to high sales during the Christmas season.
“At least through the end of the year, we expect that bright sentiment will translate into a solid finish for retailers and holiday sales,” Quinlan said.
With U.S. President Donald Trump’s confidence in the establishment of a comprehensive trade deal by the end of February, the consumer confidence could recover in the upcoming months and contribute to the rebound of U.S. retailers.
Not the Same Situation in the UK
In the UK, according to Springboard’s insights director Diane Wehrle, consumers have spent less than expected during the holiday season primarily due to the lack of progress shown by the government in achieving a better Brexit deal.
Some analysts have claimed that the increasing popularity of e-commerce platforms internationally has worsened the numbers of retailers and physical stores. But, this year, even e-commerce stores failed to achieve high sales.
“Footfall across the board is lower than last year. Some of it is down to online, but the increases in online haven’t been as great as they were. People are spending less than they were last year,” Wehrle noted.
U.S. retailers are expected to recover in valuation in the months to come and Walmart has already minimized the quarterly decline in its stock price to about 12 percent. However, UK retailers could continue to demonstrate a lack of demand from consumers across the first three months of 2019.
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