Wednesday, April 15, 2020

Retail Sales Plunge, Trump Names Top Real Estate Executives to Economic Task Force

Retail Sales Drop

Brick-and-mortar retail sales fell 8.7% in March from the previous month as cities and states shut down businesses in an attempt to slow the spread of the coronavirus, according to the Commerce Department.

It’s the biggest decline since 1992, when this type of monthly tracking started, signaling that retailers may have trouble paying leases or may be more likely to reduce their property use. The report also gives a broader sense of the steady stream of headlines of retailers struggling, including just in the past week off-price retailer Burlington Stores to department stores like J.C. Penney and Macy's.

A Reuters survey of economists had projected an 8% decline. The report sent stock markets falling in Wednesday morning trading. The Dow Jones Industrial Average, for example, was down about 650 points, or roughly 2.75%.

Few retail categories were spared. Clothing stores suffered the steepest decline, plummeting 50.5% from February and 50.7% compared to a year earlier. Restaurants and bars, some of which are trying to survive with delivery and to-go orders, saw sales drop 26.5% from February.

But there were winners amid the sales carnage. Consumers flocking to grocery stores to stock up pushed their sales up nearly 27% from February and 29.3% higher than in March 2019.

Building material and garden centers saw a 7.7% bump from March 2019. Health and personal care stores rose, as did general merchandise retailers.

April retail sales may mirror March or prove worse. The University of Michigan’s consumer sentiment index dropped 18.1 points in early April, the largest monthly decline for the university’s “Surveys of Consumers.”

Tim Quinlan, a senior economist for Wells Fargo Securities in Charlotte, North Carolina, told Reuters the “panic buying at grocery stores cannot offset the retrenchment in spending that we will see in other categories.”

While negative now, consumers surveyed by the University of Michigan “anticipated improved prospects in a year across a wide range of expected changes in personal finances as well as overall economic conditions,” Richard Curtin, the consumer survey director, said in his report on the survey results.

Trump Names Real Estate Executives to Task Force

President Trump’s task force for reopening the economy includes eight executives from major commercial real estate firms around the country. They are among 200 business leaders Trump named to different “Great American Revival Industry Groups” to help determine how and when the country fully reopens businesses.

  • David Simon, CEO of Indianapolis-based Simon Property Group, America’s largest shopping mall owner.
  • Rick Caruso, founder and president of the Los Angeles outdoor mall owner and development firm bearing his name.
  • Steven Roth, CEO of New York City-based Vornado Realty Trust, which owns office and retail real estate.
  • Stephen Ross, CEO of New York City-based Related Cos., a developer of such projects as the 1.1 million-square-foot mixed-use tower 35 Hudson Yards.
  • Jon Gray, president and chief operating officer of global asset management and private equity firm The Blackstone Group, which has $163 billion in real estate. Stephen Schwarzman, Blackstone’s CEO is in the financial group.
  • Donald Bren, owner of Los Angeles-based real estate investment firm Irvine Co.
  • Barry Sternlicht, founder and CEO of Miami Beach, Florida-based real estate investors Starwood Capital Group.
  • Steve Witkoff, owner of New York City-based real estate developer and investor Witkoff Group.

Business Group Outlines a Recovery Path

The Business Roundtable, an association of CEOs from America’s largest corporations, presented a detailed recommendation for reopening businesses.

There is crossover between Roundtable membership and those selected for Trump’s Great American Revival Industry Groups. Marilyn Hewson, Lockheed Martin’s CEO, for example, is on the Roundtable board and one of the defense industry representatives on the task force.

In a letter Tuesday to the White House Coronavirus Task Force, the Roundtable noted that safety should be first and foremost one of the overriding principles.

It also said that while there should be coordination among states, the federal government should be leading with guidelines to “build confidence for workers and consumers by fostering a common understanding of the measures being taken across the country.”

The federal government should set the national strategy that is then executed by state and local governments. The roundtable recommended that federal guidance include four risk levels that reflect the transition from shelter-in-place, at level four, to normal, level one.

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