Gas prices hurt retails sales

Gasoline prices sock retail sales

Money spent at pump is not going to stores, which reported drops at the cash register.

By Tenisha Mercer /
The Detriot News


Spiking gas prices have forced Pat Baldwin to spend $200 more a month on gas for her 1999 Dodge Ram van -- money she used to spend on shopping sprees at Lane Bryant and other stores.

"My clothing budget has gone to zero," said Baldwin, 39, of Detroit, who now skips eating out for brownbag lunches at work. "The average person can't keep withstanding these types of increases."

The impact of high gas prices is have a major impact on Michigan retailers. According to data released Wednesday by the Michigan Retailers Association in Lansing and the Federal Reserve, the state's merchants posted their lowest July sales figures since 2001.

Rising gas prices is taking a toll on crucial back-to-school sales, which retailers were counting on to reverse nine straight months of declining sales on a year-over-year basis. The region's high unemployment and economic uncertainty has hit many residents in the pocketbook.

"Gas prices are another nail in the coffin for retailers in Michigan," said Gary Ruffing, a retail analyst for BBK Ltd. in Southfield. "Michigan's economy is so fragile. People are struggling with whether they are going to have a job and now they're faced with paying an exorbitant amount to get to work, let alone go shopping."

The Michigan Retailers Association survey found that 65 percent of retailers it surveyed had flat or declining sales in July compared to the same time last year; 35 percent reported higher sales.

The figures create an index of 43.1, down from 47.1 in June and 45.9 in May, the worst July index figures since 2001. Numbers below 50 indicate a decrease in retail activity.

"Retailers in Michigan have been struggling all year," said Tom Scott, a spokesman for the Michigan Retailers Association in Lansing. "We saw a little bit of improvement over the last two months so now the question is can we continue the momentum or do we get knocked backwards?"

Surging gas prices haven't helped, forcing retailers to monitor ballooning gas prices along with their bottom lines.

"If people are spending an extra $15 or $20 to fill up, that's money that they could have spent at stores," Scott said.

Discount retailers, whose customers generally have less disposable income, have the most at stake.

With 20 discount stores in Metro Detroit, Big Lots Inc. in Columbus, Ohio is "concerned" about rising gas prices, said company spokeswoman Pat Zeigler.

"In terms of people and one-stop shopping trips, it's starting to take a toll among all retailers," she said.

Earlier this month, Wal-Mart blamed higher gas prices for revenue that fell short of projections.

"Customers have told us that the prices of gasoline is one of their top concerns," said Marty Heires, a spokesman for Wal-Mart Stores Inc. in Bentonville, Ark. "For a certain segment of our customers, what happens is that when they see one area of their budget increase, they have to make an adjustment in other areas and their discretionary spending goes down."

Retailers are also feeling the sting of higher gas prices. Wal-Mart, for instance, spent $30 million more for fuel to ship its products during the first quarter compared to the same time a year ago, Heires said. Could that mean higher prices for customers at stores?

Probably not. Wal-Mart has largely kept its prices the same, Heires said, and other retailers are expected to follow.

One area that isn't affected by rising gas prices: luxury retailers.

Sales at the Mont Blanc store at the Somerset Collection in Troy -- which sells fine pens and other items -- have increased from last year, said store manager Pamela Rumely.