2007 Industry Report: Retail
TREND: Growth in personal income is slowing in the state - from 3% in the first nine months of 2005 to 2% in 2006.
OUTLOOK: A cooling housing market could cause frustrated sellers to pinch pennies, halting a run of record retail -sales and growth.
Economists don't always see eye to eye. And even when they do - most, for example, believe retail spending won't grow much in North Carolina this year - they often don't concur on the reason.
Jim Smith, a professor at Western Carolina University's Institute for the Economy and the Future, predicts that the $1 bump in the state minimum wage, which increased Jan. 1 to $6.15, will slacken sales. "People who don't produce enough to be paid that much will either never get hired or lose their jobs." Wachovia analyst Mark Vitner believes the latest hike "will tend to boost spending in stores teenagers frequent because most of the people who make the minimum wage are teenagers from relatively affluent households." He says a slowdown in the housing market could slow retail, too. "Folks are likely to pull back a little and spend in line with their incomes."
Statewide, retail grew 0.6% to $23.9 billion in 2006, according to John Connaughton, an economics professor at UNC Charlotte. He predicts it will grow 0.1% this year, but as a percentage of gross state product, it will slip from 7.1% to 7%. Smith forecasts the gross state product of $367.3 billion in 2006 will grow about 2% but only after a mild recession he thinks will begin in May and end in November.
Results for 2006 were mixed for major North Carolina-based retailers. Mooresville-based hardware retailer Lowe's reported same-store sales were down 4% in the third quarter compared with the previous year, and the company expected them to be down 4% to 6% in the fourth quarter. Matthews-based Family Dollar Stores, which operates more than 6,200 discount stores in 44 states, reported flat sales - up only 0.9% from the previous year. Earnings were up 6% for the fiscal year ended Aug. 26.
The Pantry added 113 stores during the fiscal year that ended in September and 57 more by early December, giving it more than 1,500 convenience stores in 11 states. The Sanford-based chain reported more than $6 billion in revenue for the 2006 fiscal year, with same-store sales up about 3%. Asheville-based Ingles Markets, which also ended its fiscal year in September, recorded record sales, $2.6 billion, up nearly 15% from the year before, and record net income, $42.6 million, up 60.3%. Same-store sales for the grocery chain were up 5.9%. Harris Teeter, a grocery-store subsidiary of Charlotte-based Ruddick, reported $2.9 billion in sales, up 10.5% from the year before, with same-store sales up 3.2%.Charlotte-based Belk, which has 315 department stores in 18 states, reported sales up more than 20% to $2.3 billion in the first three quarters of its fiscal year, which ended in January. Same-store sales were up nearly 5%, with much of the rest of the increase credited to the purchases of 38 Parisian department stores from Birmingham, Ala.-based Saks in 2006 and the acquisition of 47 Proffitt's and 11 McRae's department stores in 2005.
One thing economists can agree on is the impact of newcomers - though they identify different migrants. Vitner cites the Hispanic population, which the U.S. Census Bureau estimated in 2005 at more than 500,000. "The story of the next decade is not going to be just the growing population of Hispanics and Latinos, but the rising wealth of Hispanics and Latinos and the increased purchasing power that demographic is bringing to the market." Smith points to wealthy retirees who move to the state, especially to Pinehurst and surrounding Moore County. "It's one of our 10 highest-income counties."