The weather might be warming, but consumers don’t seem ready to blossom.
This year started off with some promise for retailers. Christmas selling was solid and so was the job market. And the incoming administration of President Donald Trump was seen as pushing business-friendly initiatives, including tax cuts and deregulation.
But the tone has shifted and seemingly everything — from new tariffs to massive government layoffs — is happening all at once, amping up the uncertainty in business.
Here, five signs that retail could be in for a tough spring.
1. Bad Vibes
The University of Michigan Surveys of Consumers reported on Friday that March consumer sentiment fell 12 percent from February — the third straight month of declines.
“The expectations index plunged a precipitous 18 percent and has now lost more than 30 percent since November 2024,” said Joanne Hsu, director of the Surveys of Consumers, in her monthly update on Friday. “This month’s decline reflects a clear consensus across all demographic and political affiliations; Republicans joined independents and Democrats in expressing worsening expectations since February for their personal finances, business conditions, unemployment and inflation.
“Consumers continue to worry about the potential for pain amid ongoing economic policy developments,” Hsu said. “Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009.”
2. Lululemon’s CEO Warning
Lululemon Athletica Inc. stumbled last year with a lack of newness in its product assortment. The activewear powerhouse has course-corrected on the fashion front, but chief executive officer Calvin McDonald signaled some caution for the year ahead.
“We started this year with several compelling new product launches, but we also believe the dynamic macro environment has contributed to a more cautious consumer,” McDonald said. “Based on the survey we conducted earlier this month in conjunction with Ipsos, consumers are spending less due to increased concerns about inflation and the economy. This is manifesting itself into slower traffic across the industry in the U.S. in quarter one, which we are experiencing in our business as well.…We are controlling what we can control, and we expect to see modest growth in U.S. revenue for the full year of 2025.”
3. A Never-ending Trade War?
While Trump was keen to disrupt the status quo in his first term with a few splashy tariffs increases — especially on China — the early days of his second presidency look more like the self-proclaimed “Tariff Man” is keen on all-out trade war.
Kind of.
So far, the White House has hit Canadian and Mexican goods with a 25 percent tariff increase, while importers bringing in goods from China are paying 20 percent more at the border. He’s also slapped a 25 percent tariff on most imports of cars and car parts.
And there are plenty of threats that things could get worse, like with a potential 200 percent increase on the duty charged for Champagne.
Trump has called Wednesday, when he plans to roll out the next step in his trade war, “Liberation Day,” but it’s still unclear exactly what that means.
While Trump sees tariffs as a way to encourage U.S. production, importers argue they will instead raise prices on consumers. Even if the worst of the president’s social media missives on trade don’t come to bear, they are enough to frazzle fashion and tangle up supply chains.
4. A Shaky Stock Market
Signs that the consumer is pulling back and that the trade war is revving up has investors on edge. Wall Street abhors uncertainty almost above all else.
The Dow Jones Industrial Average dropped 1.7 percent, or 715.80 points to 41,583.90, on Friday.
In retail, Lululemon led the way down, falling 14.2 percent to $293.06, but the active brand had plenty of company.
Also in retreat were Victoria’s Secret & Co., off 6.1 percent to $18.32; Guess Inc., 5.5 percent to $11.07; VF Corp., 4.7 percent to $15.69; Amazon.com, 4.3 percent to $192.72; American Eagle Outfitters Inc., 4.1 percent to $11.42; Mytheresa, 4 percent to $7.47, and Gap Inc., 3.8 percent to $20.42.
5. Sales Are Already Weakening
February retail and food service sales were weaker than economists were forecasting, rising just 3.1 percent from a year earlier, with a lot of that gain coming from inflation of 2.8 percent.
Department store sales were down 3.9 percent and apparel and accessories specialty stores were up just 1 percent, according to a March 17 update from the Census Bureau.
Fashion chains attributed some of that weakness to cold weather and were clearly crossing their fingers and hoping the trend changed with the weather.
Jack Kleinhenz, chief economist at the National Retail Federation — a stalwart booster of the industry — said at the time that “are apprehensive and carefully navigating lingering inflation and turmoil related to changing economic policies.”
And that apprehension seems to only be growing.