Retail Industry May 25-31, 2009: Stabilization Hopes Stall In Sector Ups & Downs

“Stabilization” is the buzz word in the U.S. retail industry as both experts and consumers seem very intent on finding numbers that will give them an excuse to believe that the worst of the retail recession is over. But after a week filled with both store closings and openings, Chapter 11 filings and resolutions, and economic indicator ups and downs, stability is a notion that is more rooted in hope than in substance.

The numbers added to the 2009 Store Openings list were larger than the number added to the 2009 Store Closings list last week. This has been the case for several weeks, which is a positive sign to those who are paying attention. Enthusiasm about this trend is tempered a little by the realization that the store closings (and subsequent job cuts) are already historical events, and most of the store openings are still just future predictions.

Hope wins the decision in the first round.

A clear example of the push-me pull-you reality that the U.S. retail industry is still experiencing was seen last week in the Zales and TJX retail chains.

Apparently a lot of diamond shopping wasn't being done for Mother's Day this year, or at least it wasn't being done at Zales. The jewelry retailer reported weaker-than-expected third quarter results last week, and, consequently, the chain also announced that it would pick up the pace of the 115 store closings it has planned for 2009.

In contrast, shoppers were spending freely at the TJX family of deep discount stores. TJ Maxx and Marshalls stores had their most profitable quarter since they joined forces in 1995. Offshoot A.J. Wright’s $4 million quarterly profit was higher than the cumulative profit of its 11-year history. The company’s Home Goods store profits leapt 75%. So while Zales is racing to close its doors, TJX will be racing to open new ones, after quickly adding 20 more stores to its grand opening schedule for 2009.

I suppose some sort of financial poetic license could label the sum total of these kind of expansion and retraction activities as “stabilization.” It’s a little bit like saying that a famine in Africa is balanced out by fast food overconsumption in the U.S., though. The median of the extremes doesn’t exactly represent equilibrium.

Round two is a draw. More weekly news...