Department Stores and Debt Collectors Can Find Solace on Common Ground

Last week, retail weakness was highlighted in the release of flat U.S. same-store sales figures for the month of March.

Amid a weakening economy and rising unemployment numbers, retailers such as Gap Inc., American Eagle and Abercrombie & Fitch to name just a few, have continued to struggle, posting same-store sales declines in March of 18 percent, 12 percent and 10 percent respectively.

This news of course came as no surprise as consumer confidence – an increasingly watched barometer of overall economic health – throughout the first quarter has seen steady declines across the board in many indices tracking consumer sentiment.

Lowered monthly sales figures for retailers from apparel chains to department stores has been one of the manifestations of this plunge in overall consumer confidence about the economy and their own personal financial health. Another affect has been a shift in discretionary spending behavior focusing more on necessities as more Americans worry about the cost of essentials such as food and fuel, recently reported by a Gallup poll showing that the cost of food has superseded consumer concerns over the cost of healthcare. 

This shift in part can explain why Wal-Mart Stores reported a rise of 0.7 percent in U.S. same-store sales, led by an increase of 0.9 percent in its namesake Wal-Mart chain from continued strength among sales of groceries and health and wellness products.

As news of the unemployment rate rising to 5.1 percent following the lose of 80,000 jobs in March and consumer bankruptcy filings increased 27 percent compared with the same period last year (“Economy Creating a Challenging Collections Environment”), consumers will continue to react to such news with increased anxiety, pushing this shift in discretionary spending behavior.  Such figures will inevitably present collections challenges, but to what extent these numbers will impact the accounts receivable management industry moving into the second quarters remains to be seen.