Consumers are buying clothing, just not at department stores, which reported dismal earnings results. Fred Katayama reports.
U.S. retail sales surged in April, experiencing their largest gain in a year. But this comes amid a retail wreck: department store chains reporting dismal quarterly results. Consider just this week: Sales at established stores fell 5.6 percent at Macy's, 3.9 percent at Kohl's, 1.7 percent at Nordstrom, and 0.4 percent at J.C. Penney. People are buying clothing, just not at department stores, says IHS Global Insight's Chris Christopher. (SOUNDBITE) CHRIS CHRISTOPHER, DIRECTOR OF CONSUMER ECONOMICS, IHS GLOBAL INSIGHT, (ENGLISH) SAYING: "What you're seeing is, when people want to buy their clothing, a lot of times, they buy it online or they go to a specialty clothing store or a family clothing store." We caught up with some shoppers in Manhattan. (SOUNDBITE) JONI NANO, PEDESTRIAN, (ENGLISH) SAYING: "It's just way easier to shop online. Just click, order, it comes to your house, get one-day shipping." Young consumers are avoiding department stores. They're flocking to fast-fashion retailers such as Zara and discount clothiers like TJ Maxx. (SOUNDBITE) MAISHA OACH, PEDESTRIAN, (ENGLISH) SAYING: "The style is better, and the prices are better, and clothing looks better. I think, Macy's is more of a like older kind of thing, you know." Department store stocks are trading at cheap prices, but Schroders' Matt Ward says don't buy them. (SOUNDBITE) MATTHEW WARD, PORTFOLIO MANAGER, SCHRODER INVESTMENT MANAGEMENT "I think we'd avoid that. We'd focus again on guys like Amazon that continue time and time again to expand the top line." Department stores have been cutting staff and closing stores, but Christopher says they'll need to do more than that. (SOUNDBITE) CHRIS CHRISTOPHER, DIRECTOR OF CONSUMER ECONOMICS, IHS GLOBAL INSIGHT, (ENGLISH) SAYING: "They have to specialize more and find their niche, and of course, there may be a lot of marketing involved." IHS Global Insight sees department store sales falling each year through 2020.