Home And Car Sales Take a Bite Out Of Restaurants (And Retail)

Any major retailer that depends in the slightest on clothing sales could tell you that shoppers aren't splurging on new outfits this year. It seems that families are making do with the fashions they have, and spending the extra cash on their homes.

"While emerging strength in the housing and automotive sectors is a long-term positive, the near-term spending on these big-ticket items is crowding out other spending," Gregg Steinhafel, Target's CEO, said in his August conference call with analysts.

That means that the likes of Lowe's and Home Depot are making bank, with both reporting second quarters that far outpaced predictions, but the Walmarts and Targets of the world have been left to cut back their own forecasts.

Car sales are making a comeback as well, selling at a 15.7 million seasonally adjusted annualized rate, which puts the U.S. on course for its best year since 2007. Rob Morgan, chief investment strategist at Fulcrum Securities, attributed that growth to what he called a "forced replacement cycle" in which many people had to put off purchasing new cars until now.

But car sales and home improvements aren't just eating retail's lunch, they're also cutting into restaurant sales, which decreased in June and July.

Casual dining establishments like the Cheesecake Factory and Texas Roadhouse dropped 3.5 percent last month on the heels of a 2 percent drop in June, according to the Knapp-Track Index. August sales don't look much better, even though sales are expected to show some improvement.

"Consumers' priorities change every month based on what they can afford," said Malcolm Knapp, creator of the index. Most Americans can't eat out as much as they'd like these days and have had to cut spending "very begrudgingly" to make room for other purchases.

For more:

- See this Bloomberg story
- See another Bloomberg story

Related stories:

Sears Had The Same Same-Store Drop As Macy's. How Can That Be?
Target's Same-Store Sales Up, But The Outlook Is Shaky
Nordstrom Same-Store Sales Drop, Killing The Rich-Shopper Theory

Suggested Articles

Costco changes up its menu items, and Alibaba and Guess partner for a physical store.

Janey Whiteside, Walmart's new chief customer officer, is well acquainted with the importance of customer service in modern retail.

Whole Foods will offer deals on Amazon's Prime Day, and tariffs against China are causing pricing hikes.