Former Toys ‘R’ Us CEO Gerald Storch warned Wednesday that in the fall “we’re going to see record retail bankruptcies” for small businesses and some chains.
He pointed out that he believed mom-and-pop stores would experience a “decimation” of mom-and-pop stores on Main Street, but that “those chains that have struggled strategically for years and never succeeded” are also “going to have big problems as we turn the corner here after the holidays.”
“So it’s really going to bite as we get to the holidays and beyond,” the retail expert told ‘Cavuto: Coast to Coast’ on Wednesday.
Storch noted that the decline in consumer spending “is coming from the bottom up,” starting with lower-income Americans and then the middle class.
WHY IS INFLATION STILL SO HIGH, AND WHEN WILL IT START TO COOL DOWN?
However, he pointed out that “curiously, the luxury consumer has not yet been affected”.
|Teleprinter||Security||Last||To change||To change %|
|Me: DJI||DOW JONES AVERAGES||32812.5||+416.33||+1.29%|
|I: COMP||NASDAQ COMPOSITE INDEX||12668.158823||+319.40||+2.59%|
“Usually when the stock market goes down, so do luxury sales,” Storch noted. “It hasn’t happened yet, but we expect it to happen.”
Neiman Marcus Group CEO Geoffroy van Raemdonck also noted in an interview with “Cavuto: Coast to Coast” last week that recent market volatility has not impacted sales to the extent where the company continues to experience healthy growth.
He noted that customers who spend more than $10,000 a year account for nearly half of the company’s sales despite economic headwinds, including high inflation.
Markets have been turbulent in recent weeks as concerns about Federal Reserve rate hikes amid high inflation continue to worry investors.
Last week, Fed officials said the central bank would raise rates an additional 75 basis points to try to tame persistent inflation, which is currently at 40-year highs.
It was revealed last week that US consumer confidence fell again in July, with rising prices for basic necessities, including food and gasoline, exacerbating financial hardship for millions of Americans.
The Conference Board said last week that its consumer confidence index fell to 95.7 in July from 98.4 in June, largely due to concerns over current economic conditions, including inflation. The data marks the lowest reading since February 2021.
Storch argued Wednesday that the Fed fights inflation by taking an “issue to the heart” of American consumers “because it’s the only tool they have.”
He argued that the central bank’s actions to raise rates, in turn, “will make things too expensive and, therefore, eventually the economy will slow down.”
“So they’re kind of killing the patient to cure the patient,” he continued, adding that “there’s no soft landing here, there’s [inflation] is not transient, and that is not good.”
The Associated Press contributed to this report.