UPDATED: Retail Sales Up, But Gas Prices May Ruin It
Updated 03/03/11 – 4:14 p.m.
CHICAGO (CBS) – New numbers show retail sales are rising, but with soaring gas prices, the gains might be short-lived.
The figures released Thursday morning show that revenues at Limited Brands rose 12 percent in February, with a strong showing also from Bath and Body Works, and Victoria’s Secret. Sales were also up 5.8 percent at Macy’s, and 1.8 percent at Target.
But as CBS 2’s Susanna Song reports, merchants are worried that rising gas prices will keep shoppers away from stores this spring and summer. Likewise, consumers are wondering how they can budget shopping in when gas prices keep rising.
They say they may have to sacrifice food and fashion for fuel.
“I don’t buy for myself as much as I do for my kids, and even for them, I’m just cutting my spending more and more,” said Kate LaMantia as she walked down State Street downtown. “Absolutely, it affects everything.”
As CBS 2’s Dorothy Tucker reports, that trend is exactly what has economists worried – rising gas prices causing shoppers to pull back.
“I’m changing my shopping habits completely,” driver Robin O’Grady said.
It’s a change many consumers have been making, motivated by sticker shock at the pump.
Ann Neumann said it costs her about $50 to fill up her tank, while before the recent spike in gas prices, it cost her about $35.
“It hurts pretty bad, yeah. I’ve resorted to asking my parents to help pay for gas so I that can get to where my school has sent me,” she said.
Amy Whealan said she’s taking money she would have spent on extras for her wedding plans to help pay for her commute to work.
“It’s almost $4 a gallon and you don’t have much left,” she said.
Since consumers have to spend more at the pump when they fill up their tank, experts said it’s no surprise those same consumers are spending less in the stores.
As of now, the average gas price in Chicago is $3.60. But prices have now topped $4 at two gas stations. At the BP station at 755 W. Lawrence Ave. near Lake Shore Drive in the Uptown neighborhood, and now also at the Mobil station at 1106 W. Fullerton Ave. near DePaul University, the price for a gallon of regular gas is $4.09, according to chicagogasprices.com
“With rising gas prices, that cuts out on what we spend on other products, such as apparel or other discretionary purchases of that kind,” said R.J. Hottovy, a retail analyst with Morningstar. “Rising gas prices certainly puts retailers in a difficult situation.”
Until the turmoil in the Middle East and North Africa calms down, it’s hard for anyone to predict when gas prices will drop. Analysts say the price spike is based largely on fear–rather than any problem with short supply. Newsradio 780’s Regine Schlesinger reports.
“I was asked if prices were going above $5 a gallon, or to $5 a gallon,” said oil industry analyst Daniel Flynn. “Right now, that’s a very, very good possibility.”
LISTEN: Newsradio 780’s Regine Schlesigner Reports
Patrons at area gas stations and shoppers alike were feeling the frustration.
“I’m visiting the pumps too much; too frequently. So I’m just trying to get to the South Side where I can get cheaper gas,” said Chicago firefighter Terrence Holmes.
“My husband drives out to the suburbs every day from downtown, so he’s taking the smaller car just because the prices are so bad,” added LaMantia.
Higher gas prices also mean retailers must pay more for merchandise to be shipped to their stores and for raw goods, like cotton.
Hottovy said retailers would actually like to raise their prices to offset their rising costs, but they might be forced to cut prices instead.
“Ultimately, I think we will see more sales and more promotional activity to lure consumers back into stores,” Hottovy said.