Outlook partly sunny for Nevada retailers, says trade association

With back-to-school buying stagnant but an uptick in sales expected this holiday season, the Retail Association of Nevada (RAN) is forecasting a mixed outlook for the state’s retailers.

In a brief report released today, RAN says a continued slump in the state’s economy coupled with ever increasing growth in online sales could continue to hamper retail sales through the end of the year.
“The outlook now is things are fuzzy, things are a little hectic, but we anticipate a strong consumer show for those holiday times,” said Bryan Wachter, director of government affairs at RAN in Las Vegas. “But that’s not to say there isn’t cause for pause. We’re definitely still seeing unemployment, we’re still seeing foreclosure rates. We are seeing uptick on the Strip, we’re seeing visitor volume increase, we’re seeing people come in on airplanes, McCarran visitor volume is up. So we’re going to be looking for those to start trickling into the local economy.”
In his report, Wachter cited several negative trends that could curtail spending for the next several years. Consumer debt has dropped from a peak in the third quarter of 2007, but Wachter said that improvement is misleading.
(But) the declines are heavily influenced by [1] the discharge of debt through bankruptcy and other forms of default and [2] payment ratios being artificially reduced by extended periods of record-low interest rates. Many Nevada consumers are underwater on their homes and are carrying substantial credit card debt; the systematic repayment of these obligations will inevitably cannibalize consumer spending for at least the next several years.
Wachter said that while interest rates are low now, and the Federal Reserve Bank has committed to keeping them low through next year, Standard & Poor’s recent downgrade of U.S. debt could bump rates up, putting a further damper on spending.
Consumer confidence could remain low and Nevada, stigmatized with the worst unemployment in the nation, may have difficulty attracting new business, says the report.
And the online marketplace is likely to continue to sap sales from brick-and-mortar stores. That’s in part because unlike other retailers, most internet-based merchants don’t collect sales tax, which in Clark County is 8 percent.
“Their products are eight percent cheaper just based off the ability to not have to collect tax,” said Wachter. “We think that’s unfair. It’s almost a government-mandated advantage for the online companies.”
On the bright side, Wachter said visitor volume jumped in the last 12 months by 3 percent, or by 1.3 million trips. Those visitors are spending less at casino tables but more on eating, drinking, shopping and entertainment.
Wachter projects pent-up demand for large ticket items such as cars and appliances, which consumers have been putting off buying for the last few years.
Also, Nevada’s population, based on increasing surrenders of out-of-state driving licenses to the Department of Motor Vehicles and a spike in school enrollments, is growing. Some of that growth comes from retirees, who could be a stable segment of the retail market, and from Hispanics, Asians and Pacific Islanders, who have been under-served by retailers in the past.
“That’s good and bad,” said Wachter. “That’s good for retailers who are able to adapt and move, and it’s unfortunate for retailers who can’t adapt.”
___
Audio clips
RAN’s Bryan Wachter says retailers tied to construction, such as furniture stores, may be in for a tougher time than other merchants:
081711Wachter1 :25 general merchandise stores.”
 
RAN’s Wachter says the upcoming holiday season and increased tourism is cause for cautious optimism among retailers:
081711Wachter2 :34 into local economy.”