Retailers Concerned with Europe’s Problems

May 24, 2010
Tom Ryan

By Tom Ryan

While neither have stores in Europe nor source much product from
the region, Home Depot and Lowe’s are at least two retailers somewhat concerned
about how the current economic crisis in Europe may impact the U.S. consumer’s
psyche and possibly derail the retail recovery.

On the one hand, more events
such as the May 6 stock market plunge – when the Dow Jones Industrial Average
briefly plunged nearly 1,000 points – could possibly reverse the recent uptick
in U.S. consumer confidence.

“When the consumer sees those types of things happen and they don’t understand
why, I think it does raise some concern in their minds,” said Lowe’s chairman
and chief executive Robert Niblock in an interview last week with The Wall
Street Journal

Also, concerns that a financial crisis may reoccur in
the U.S. akin to Europe’s could “cause consumers to take pause,” he
said. Nonetheless, he added, “Assuming
we don’t have something like that take place, we feel good about the year.”

Depot chief financial officer Carol Tome said Home Depot’s concerns also revolve
around Europe unsettling U.S. financial markets.

“If the (European) situation would cause more financial turmoil here
in the U.S., and if that would impact consumers’ ability to get credit or just
the overall sentiment on the economy, it could be bad,” she told the Journal in
a separate interview.

But it’s too early to say there’s likely to be any effect,
she added. “We
think it’s had no effect” so far, Ms. Tome said.

Discussion Question: What effect, if any, do you think Europe’s debt crisis
will have on U.S. retail?

Please practice The RetailWire Golden Rule when submitting your comments.

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12 Comments on "Retailers Concerned with Europe’s Problems"

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David Livingston
10 years 11 months ago

Good retailers will do well no matter what. So for the good retailers that provide a compelling shopping experience, there is nothing to worry about. For the dazed and confused retailers, the crisis in Europe will be just another excuse for another bad quarter.

Liz Crawford
10 years 11 months ago

The European financial crisis could serve to bolster US retail if consumers feel more confident about the relative value of the dollar. However, I don’t think that the price of the Euro is changing in isolation. Unfortunately, the volatility of the stock market is making shoppers wary–it’s not permitting a return to business as usual. The new usual may really be quite a bit more restrained, especially if the roller coaster doesn’t come to stop.

Max Goldberg
10 years 11 months ago

Europe’s financial crisis, and the resulting “adjustment” on Wall Street, brings uncertainty to consumers just as they are beginning the long, slow process of getting back on their feet. This is bad news for U.S. retailers. The crisis reminds consumers to be cautious and reinforces the notion that economic events are out of their control–which can’t be good for retail sales.

Gene Hoffman
Gene Hoffman
10 years 11 months ago

Of course Europe’s debt crisis makes us worry but that is a stimulant. We know we are more resilient, focused and disciplined–although the latter could be slipping–than they are in the EU. We believe “We That Shall Prevail” and that makes Americans work diligently to stimulate our commerce and economy aggressively to keep it successful. I pray we continue to persist in that spirit.

Anne Howe
10 years 11 months ago

Retailers in the U.S. would be well-served to keep a close eye on global economic shifts and their relationship to the U.S. “present situation” economic index. This is the index most closely aligned to retail spending, and if it begins to dip down again, retailers need to be prepared to act swiftly to connect with shopper mindsets with messages that alleviate fear. No small task, but for retailers, keeping ultra current on this correlation will distinguish success.

Joan Treistman
10 years 11 months ago

I agree with those comments before mine. Bad news anywhere makes consumers wary of what can happen to them.

Importantly, retailers are human as well. If they feel vulnerable as a consequence of what happens overseas, they will plan accordingly. That strategy can impact sales (less inventory perhaps?) and profit (fewer promotional dollars perhaps?).

We’re all connected and sometimes the same person: consumers, retailers, marketers….

How one of us feels, how one of us reacts, affects us all.

Roger Saunders
10 years 11 months ago

This crisis cuts both ways for retailers like Home Depot and Lowe’s.

A crisis induced weakening of European bonds has the impact of lowering mortgage rates in the U.S. Does a lower mortgage rate encourage more people to refinance or take on new mortgages, thus prompting added sales for the home improvement sector?

A stronger dollar makes European manufactured goods more affordable in U.S. stores. Does the added choice enhance sales at retail?

The economic impacts keep shifting. Retailers, even if they don’t have stores in Europe, have to view the worldwide marketplace in a holistic fashion. The playbook is being re-written on an ongoing basis. Holding a tight focus for merchandising, operations, and marketing, so that they can adjust will keep them in the game.

Bill Emerson
Bill Emerson
10 years 11 months ago

In an interesting spin on these comments, the Wall Street Journal reported today that the financial crisis in Europe has made investing in America more attractive. As a by-product, mortgage rates for a 30 year fixed is potentially headed below 5%. Seems to me that would be a benefit for Lowe’s and Home Depot.

Cathy Hotka
10 years 11 months ago

We’ll learn more about what consumers are thinking as pollsters prep their candidates for the midterm elections. Will Americans draw a parallel between the spend-now-pay-later Europeans, and the representatives they’ve been sending to Washington?

Ralph Jacobson
10 years 11 months ago

The first thing we must do is refrain from knee jerk reactions to one-day market moves. How does a weakened European market affect US retailers? That has everything to do with what type of retail segment in which we are operating. DIY will be affected differently than food, which will be different than apparel.

If in fact the US dollar strengthens against the Euro, then manufactured goods from Europe will become more affordable in the US. As US retailers look to expand to Europe, however, there are far more factors to consider. This is a very broad discussion that should include retail segment growth projections, financial market analysis, etc.

Li McClelland
Li McClelland
10 years 11 months ago

The bad news in Europe makes American consumers all the more nervous. People here are still not over the shock of the economic upheaval that seemingly manifested itself out of nowhere in fall 2008–and they fear something similar can suddenly happen again at any time. Plus, too many are still out of work for anybody to feel very positive about spending, yet. Forget about remodeling. Americans cleaning up the vintage lawn furniture, using the old grill one more season, and planting fewer annuals are what Lowe’s and HD are up against right now.

Ben Ball
10 years 11 months ago
I believe the reactions to this thread are as diverse as any I have seen in all my years with RetailWire. And I believe that is an accurate reflection of the level of uncertainty that surrounds both public and pundit sentiment regarding the world economy right now. Gene Hoffman’s comments–not uncharacteristically–caused me to think quite a bit. They reminded me of the old Cherokee chief’s character in the Clint Eastwood movie “The Outlaw Josey Wales.” The old chief was explaining to Josey how the chiefs of all the great nations had been called from the reservations by Grover Cleveland to discuss how treaties were being violated and their people were being cheated out of things promised. The “Great White Father” implored them to “endeavor to persevere.” The chiefs returned home to many nights of council fires to consider the meaning of this request–“endeavor to persevere.” Then they declared war on the white man. Let’s hope the American consumer does not carefully consider all of the assurances of economic uplift they are hearing and then “declare… Read more »

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