Retailers Stock Up on Caution
Consumers aren't stepping up spending at the pace many retailers expected just a few months ago, raising the specter that stores will be stuck with piles of unsold goods later this year.</br></br>This dimming retail picture is part of a larger downshift in growth occurring across the economy. Consumer confidence slumped last month and the job market remains weak. On Thursday, the Federal Reserve reported consumer borrowing fell in May, another sign that they are wary about their finances.</br></br>All this bodes poorly for the kind of snapback in spending many stores anticipated only a few months ago. Last year's holiday sales were strong and many retailers expected robust growth to continue through this year, fueled in part by pent-up demand for washing machines and clothes that weren't bought during the recession.</br></br>The typical retailer has to place orders four months or more in advance of actual sales -- which makes them susceptible in the event that sales fail to materialize or simply grow much more slowly than expected.</br></br>Slower growth could mean stores will be stuck with excess inventory. J. Michael Stanley, managing director of Rosenthal & Rosenthal Inc., a specialty lender in the fashion industry known as a factor, says stores have been much more conservative in the orders they place now compared to a few months ago.