I’ve Got No Money… But Economy Good?
May 24th, 2007 | 
Author: With rising gas prices and a declining house market, it would appear that the economy really wasn’t doing all too well. But the facts would dispute such a claim. Truth is, the struggling economy hasn’t prevented consumers from doing their thing…consuming!
The clothing industry is seeing sales soar above last year’s numbers and even past analysts’ projections. Kohl’s, Nordstrom, Sacks and J.C. Penny private lines are seeing significant increases in their sales number thus far in 2007.
However, low-end clothing stores, such as Wal-Mart and Macy’s are struggling. In fact, they are performing well below market expectations, and revenues are considerably down from last year’s first quarter of sales.
So basically, middle income to high-end clothes are selling and discounted clothing lines are not…?
J.C. Penny had a 13% increase in profits for their last quarter ending May 5th. Practically half of Penny’s clothing sales are attributed to its private label brands, which are geared towards a middle and upper income consumers.
Kohl’s, another department store merchandiser, had a 25% profit increase. Obvioulsy, their sales destroyed market projections, but they also plan to add more private label brands and luxury items to their inventory.
Nordstrom’s experienced a 19% growth rate in their profits. Their department store’s clothing lines rose revenue by over $160 million due to an increase in internet sales. Nordstrom will be adding more designer clothing lines to its stock to continue their growth in sales.
So while the low income consumer is struggling to buy gas, middle and upper income households are buying luxurious clothes and designer fashion wear.
Obviously, the economy is going just well for private label buying, high-end consumers, but it’s not going so well for those who can only afford discount clothing.
Wal-Mart, the biggest retailer since Fred Flinstone sold rocks, has experienced a huge hit in revenue sales in comparison to last year. Wal-mart saw its same-store sales drop 3.5% in April, and only a .6% increase for the past quarter, well below the market projections. The hit was said to be caused by a drop-off in clothing sales, where Wal-Mart’s discount clothing lines drastically under-performed. Federated Department Stores, Inc. (Macy’s) also has announced that their profit targets were not reached for this past quarter.
You know, when people cannot afford to buy $6 jeans from Wal-Mart, there is a real problem in society. Whereas the question was once “Which came first, the chicken or the egg?” The question now is, “Which one comes first, driving to the store naked, or leaving the store with a new shirt but no gas in the car?” That’s pretty much what the low-income individual is forced to decide between. And obviously he or she is choosing to drive naked, because you need gas to get to work, and even Wal-Mart’s prices can’t compete with that.
So while the upper and middle-income buyer continues to purchase high-end clothes and designer labels, the rest of the populace will continue to wear old clothes and struggle to sell their houses.
So why is the economy doing so well for everyone but Joe Schmo?
I don’t have the answer. Everything I read keeps feeding me bull about how the economy is struggling, but the middle income households aren’t having any problem buying designer fashion, while middle to low-income families can’t afford to shop at Wal-Mart anymore.
But this situation that we are in is just a microcosm of how our government is running this nation. Everything that gets passed in Congress in reference to “supporting American economy” is just another way to make the rich richer. Lowering the capital gains tax, lessening tax obligations on the sale of second houses, and tons of other “taxbreaks” and laws don’t serve the average American, just the one on verge of going on a shopping spree.
(No Ratings Yet)
Loading ...
Posted in 
I would like to explore why the average person with a bachelor’s degree from an ivy league institution can’t get a decent job paying at least $50K if it is not in the realm of finance. I am fed up with the facades created by these money grubbing educational institutions. Has education become a capitalistic joke and ploy to get more students to take out loans and pay thousands of dollars only to graduate and be subjected to waitressing and working a meager 9-5 while the knowledge gained in college merely turns to mold? Lets discuss this economy situation more in depth!
Its interesting that you seem to blame all the problems of our “struggling” economy on the current government when there is little they can do within reason to change the current trend of the rich getting richer and poor getting poorer.
First of all, gas prices are not controlled by the Government, we do not live in a command economy and there is not a whole lot we can do. You have failed to account for the implications of a rising China. China’s seemingly unquenchable thirst for oil and other commodities has driven prices through the roof, which is then passed on down to the American consumer.
As far as the department stores are concerned. Kohl’s is not any higher on the class scale than Macy’s and just because they plan on importing more private label items because, they are actually selling, does not mean that it is reflected in the numbers you quoted. And this whole bit about buying clothes, have you ever stopped to think that maybe people have more money to buy luxurious clothes because the economy is doing better and that could be one reason for a drop in wal-mart jeans? because no one wants them? Not to mention, I cant tell you the last time I caught a low-income looking individual in wal-mart jeans.
I agree its a shame the middle class is disappearing, but again a lot of this is due to Globalization and the outsourcing of jobs to India and China, jobs such as computer science that were once considered solid, stable jobs. However, I would also tell you protectionism is not the answer to protect the American economy in the long run. I recently wrote a paper on future trade policy with China and would encourage you to take a look. I appreciate your views on the economy but disagree with the blame you place on the government.
If you don’t think the Government controls gas prices, you are being silly. If you’ve watched an ounce of the Presidential Debates, you’d know that one of the biggest questions for both parties was pertaining to what they would do to lower gas prices. The very fact that the U.S. is Global economy leader means that what our government does effects not only our own gas prices, but the cost of gas across the world. And the mere fact that Bush has gone into the Middle East to take oil is a testament to the school of thought that the U.S. has control over gas prices. But you’ve lived in Texas all of your life, so I am sure that you can really see too far past that conservative outlook.
The decline in profits at these low-cost merchandisers is partially do to the fact that they tried to sell high-end clothing at their stores. Their low cost customers can’t afford that, and the losses are a testament to the fact that they can’t really afford the low-cost items either. Clothing sales are down this year across the board, except for private label clothing and other high end material, because the upper class is doing well in the economy while the middle class if flailing.
Your whole notion that you can put the failing economy on anybody but the government is ludicrous. That’s the government’s job in a free market economy. They let business run, but they regulate it so that it benefits all. But when you give tax cuts to the rich (such as the freakin’ capital gains tax cut), and allow middle class persons to give way to student loans, a horrible real estate sales market and have the current generation making less than their parents did 25 years ago, then the government is the only thing that can be held at fault. Yes, capitalism gives way to those who can control. But once upon a time, small business and the middle class Americans were the ones pulling the strings.
Uzo
First, just because we’re a global power doesn’t mean we can make whatever price we want gas to be, you can’t ignore China’s demand for natural resources, and anything the government did to artificially hold the prices lower would hurt our economy in the long run.
Second, you live in America, not Great Britian. However, I will refrain from arguing the government’s role in business because if I’m correct we simply come from two different schools of thought, mine being that if you work hard, the market will take care of you and reward you and while I recognize there are things like education (Bush cutting 12 billion dollars in aid was not good) that the government should take a more involved role in, for the most part I think the more the government meddles with business, the more it hurts the economy. The view behind the capital gains tax does not hurt the middle or lower class, yes I understand it doesn’t directly help them, but it does not hurt them. If anything it helps those in middle to upper middle class who are savvy enough to save what they can, something no one in our country can seem to figure out. However, the theory behind the capital gains tax was not just to aid the rich, but also hope that it would result in reinvestment and or more businesses being started, resulting in more jobs and competition.
Yes I understand this growing problem of a disappearing middle class, its impossible to miss. However I strongly believe that in the next few years it will actually continue to get worse, regardless of who is president because I think our economy needs to retool and I think that’s what we are beginning to do. We are shifting our labor market to adjust for the new demands that our being created as a result of this globalization. Also, small businesses while not being favored as much as big corporate America, have not been overly neglected and as a matter of fact it wasn’t too long ago that a generous small business tax break was passed. Anyway, I think we see the same things just believe they are a result of different things.