US retail sales plunged a record 16% in April as coronavirus hit

The plunge in retail spending is a key reason why the US economy is contracting. (AFP)
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Updated 15 May 2020

US retail sales plunged a record 16% in April as coronavirus hit

  • Sharpest drops from March to April were at clothiers, electronics stores, furniture stores and restaurants
  • Plunge in retail spending is a key reason why the US economy is contracting

BALTIMORE: US retail sales tumbled by a record 16.4 percent from March to April as business shutdowns caused by the coronavirus kept shoppers away, threatened stores across the country and weighed down a sinking economy.
The Commerce Department’s report Friday on retail purchases showed a sector that has collapsed so quickly that sales over the past 12 months are down a crippling 21.6 percent.
The sharpest drops from March to April were at clothiers, electronics stores, furniture stores and restaurants. A long-standing migration of consumers toward online purchases is accelerating, with that segment posting an 8.4 percent monthly gain. Measured year over year, online sales surged 21.6 percent.
For a retail sector already reeling from the migration of consumers to online shopping and to app-based delivery services, a back-to-back free-fall in spending poses a grave risk. Department stores like Neiman Marcus and J. Crew have filed for bankruptcy protection. Hotels, restaurants and auto dealerships are in danger.
An April analysis by a group of academic economists found that a one-month closure could wipe out 31 percent of non-grocer retailers. A four-month closure could force 65 percent to close.
The plunge in retail spending is a key reason why the US economy is contracting. Purchases at retailers are a major component of overall consumer spending, which fuels about 70 percent of economic growth.
With few Americans shopping, traveling, eating out or otherwise spending normally, economists are projecting that the gross domestic product — the broadest gauge of economic activity — is shrinking in the April-June quarter at a roughly 40 percent annual rate. That would be the deepest quarterly drop on record.
Spending tracked by Opportunity Insights suggests that consumer spending might have bottomed out around mid-April before beginning to tick up slightly, at least in the clothing and general merchandise categories. But spending on transportation, restaurants, hotels and arts and entertainment remains severely depressed.
Credit card purchases tracked by JPMorgan Chase found that spending on such necessities as groceries, fuel, phone service and auto repair declined 20 percent on a year-over-year basis. By contrast, spending on “non-essentials,” such as meals out, airfare and personal services like salons or yoga classes, plummeted by a much worse 50 percent.


Bayut and Dubizzle merge to create a Dubai-based unicorn company

Updated 7 min 55 sec ago

Bayut and Dubizzle merge to create a Dubai-based unicorn company

  • The two owner companies will also run a $150 million investment round
  • EMGP will continue operating both Bayut and Dubizzle in the UAE

DUBAI: The owners of UAE technology firms Bayut and Dubizzle have announced a merger which will form a $1 billion Dubai-based unicorn company, state news agency WAM reported on Tuesday.
Emerging Markets Property Group, EMPG, and OLX Group will also run a $150 million investment round as part of the agreement to merge their MENA and South Asia operations.
Unicorn companies are privately held startups valued at over $1 billion.
The merger makes OLX, EMGS’s largest single holder with 39 percent of shares. EMGP will continue operating both Bayut and Dubizzle in the UAE, and the merger will bring OLX entities in Egypt, Lebanon, Pakistan and several GCC countries into the company’s reach.
“This merger of EMPG and OLX will allow us to better serve our customers, given that both operate brands with a strong following and will allow us to leverage existing tech and data to paint a more accurate picture of the state of affairs in the real estate industry across the region. At the same time, we will be making significant technology investments to provide more value to all users of property, automotive and other segments of the Dubizzle and OLX platform,” Head of EMGP MENA Haider Ali Khan said.
The cumulative value of properties sold in the UAE, Egypt, Lebanon and Pakistan through the websites is estimated at $8.984 billion, offering a possible commission pool of above $1.9 billion for real estate agents.
Meanwhile, Ali Maabereh, head of mergers and acquisition (M&A) at KMPG in Saudi Arabia said M&A activity will increase in GCC countries amid the coronavirus pandemic as SMEs and several large corporates will look for capital injections to satisfy working capital needs.
“The current pandemic is creating a lot of uncertainties and contradictions in what to expect after the dust settles. The expected key impacts on companies are shortages of liquidity and working capital requirements. Though companies might be running a healthy P&L, there will be significant pressure on working capital requirements,” he said.