Americans under lockdown have been splashing out on goods from children’s toys to exercise bikes, according to figures from some of the country’s biggest retailers, even as the economy falls into recession and unemployment surges to a postwar high.
Executives said panic buying of toilet paper and other household staples at the start of the crisis had given way to a second wave of spending — much of it online — on far less essential items, in part because stimulus handouts from Washington of up to $1,200 each had encouraged customers to open their wallets.
Target, the big box chain with almost 1,900 outlets across the US, on Wednesday echoed its rival Walmart in reporting a resurgence in discretionary purchases.
Brian Cornell, Target’s chief executive, highlighted sales of clothing, which had declined 20 per cent in the company’s first quarter overall but “bounced back” towards the end of April.
While retailers said sales of a wide range of non-essential items — including puzzles, nightwear and lawnmowers — had picked up, it by no means heralded an end to a historic squeeze in aggregate consumer spending. US retail sales dropped 16 per cent last month, the biggest decline since records began in 1992.
Instead, it showed that demand for particular products — from some retailers — was strong amid huge changes in consumer behaviour.
“While demand across the picture is suppressed, there are pockets of the consumer economy that aren’t really affected,” said Neil Saunders, managing director of GlobalData Retail.
He noted that restrictions on movement had curbed spending on travel and dining out, freeing up budgets for durable goods. “Actually, people who still have a job might feel better off.”
Home improvement was a particularly favoured category for the housebound. Retailer Home Depot this week said customers had taken to DIY during the pandemic as it reported a 7.5 per cent rise in first-quarter like-for-like US sales.
Families had recently been “looking to improve their indoor and outdoor living spaces”, Doug McMillon, Walmart chief executive, told analysts on Tuesday. “Our home categories, in stores and online, took off.”
Walmart, which posted a 10 per cent jump in first-quarter like-for-like US revenues, also reported strong sales of home schooling items, as well as toys and games.
Consumers were spending some of the cash on products that could help them recreate outdoor activities in the home. Walmart reported higher sales of exercise equipment as customers cancelled gym memberships.
The recovery in such spending at Walmart and Target is in part down to the lack of other bricks and mortar options for shoppers.
Both chains sell food among their wide assortments, which has allowed their stores to stay open and given them a huge advantage over department stores, clothing retailers and other rivals that have been forced to close.
“If you wanted to buy some of these products, they were the only game in town,” said Mr Saunders.
Walmart and Target have also invested heavily in their online operations to take on Amazon, allowing them to capitalise on a surge in ecommerce during the lockdown.
Almost all of Target’s 10.8 per cent rise in like-for-like sales in the first quarter came from its online business. “The results we’re seeing today are byproducts of years and years of investment,” Mr Cornell told reporters.
Still, it is not just the more successful companies in the sector that have noticed a recent pick-up in non-essential spending by customers.
Kohl’s was forced to close its department stores after the outbreak and lost $540m in the three months to the start of May, yet the company said internet sales had accelerated in recent weeks and Michelle Gass, chief executive, said categories including women’s sportswear were “doing really well” online.
Richard Hayne, co-founder of hipster chain Urban Outfitters, told analysts on Tuesday evening that while many of its stores remained closed, online traffic had “exploded” in the past six weeks. Mid-top shoes were among the products that were selling well, he added.
Craig Johnson, founder of the Customer Growth Partners consultancy, said there were only limited signs of belt-tightening among Americans who were still in work.
“After the initial shock began to ebb, people have begun to revert to more normal consumption patterns,” he said. “We’ve seen a rotation away from the essentials to more discretionary items.”
Stimulus dollars from Washington had “heavily influenced” recent spending, McMillon said, adding they had boosted sales of products including televisions and video games.
Despite the recovery in some discretionary categories, executives remained cautious about the outlook. Walmart and Target joined other companies in scrapping full-year financial guidance.
“We all know that we see a rapid increase in unemployment across the country,” said Mr Cornell. “There’s tremendous uncertainty.”
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