U.S. retailers hit as
immigration worries weigh on Hispanic spending
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[August 24, 2017]
By Richa Naidu
CHICAGO (Reuters) - Many U.S. Hispanics are
venturing out only to buy essential goods and are cutting back on
discretionary spending, worried about possible harassment by immigration
or law enforcement officials since the election of U.S. President Donald
Trump, according to community groups, research firms and retailers.
This change in consumer behavior by the country's second-fastest-growing
ethnic group has recently been cited as a cause for worry by
already-struggling consumer companies, from big-box retailers to auto
O'Reilly Automotive Chief Executive Gregory Henslee told analysts
earlier this month that many of the company's stores with weak
second-quarter sales were in Hispanic-dominant areas of the United
States. "It's not just something that we've seen. It's something that
most retailers have seen," Henslee said.
In late July, Target Corp Chief Executive Brian Cornell at a conference
referenced a report by retail consultants NPD Group that cited a decline
in discretionary spending by Hispanics.
"They are staying home. They are going out less often, particularly
around border towns in the United States," Cornell said at a conference
in Aspen, Colo.
Trump's surprise election win last November came partly on campaign
promises to deport undocumented foreigners en masse and build a wall on
the U.S.-Mexico border. These pledges - along with Trump's claim that
Mexico was sending rapists and drug dealers into the United States -
sparked outrage within the American Hispanic community.
"For our own president to call us criminals, thieves and rapists - it's
terrible ... we live in fear of doing those simple things like going for
groceries," said a 19-year-old Chicago college student, Juan F., who did
not want his full name used out of concern for family members who are
Juan, a U.S. citizen, said he has been shopping for his household since
Trump's presidency began because family members are afraid to leave the
"People are squirreling money away and don't want to leave their houses
to go to stores," said Eric Rodriguez of Latino advocacy group UnidosUS,
which has been critical of Trump's proposals on immigration.
"They're afraid local law enforcement or immigration officials are going
to harass or embarrass them," he said in an interview.
Not all consumer categories, however, are experiencing a significant
decline in Hispanic spending. The purchase of essentials such as food
and basic household goods is still on the rise, but at a much slower
rate than in recent years, according to research firm Nielsen.
None of the reports specified any changes to first-half online spending
by Hispanics, which make up about 18 percent of the U.S. population,
according to research firm Nielsen Holdings Plc.
The lower spending by Hispanics has been hurting certain retailers since
the start of the year, according to reports by brokerage firm Jefferies
and analytics firm NPD Group.
Cornell, citing a more detailed version of the NPD report than one that
has been publicly released, said late last month that shopping visits
among Latinos were down about 11 percent in November and December. The
"concerning" trend had been noticed particularly around U.S. border
towns, Cornell said.
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Shoppers stand in a checkout line during Black Friday sales at a
Target store in Culver City, California, U.S. November 25, 2016.
"Their buying power is undeniable, as is their influence on everything from
fashion and food to music and entertainment," Cornell said.
Big-box retailers have for years invested heavily in courting the Hispanic
community's substantial spending power, which reached $1.4 trillion in 2016,
according to data by the University of Georgia's Terry College of Business.
Luis Fitch, founder of Minneapolis-based Hispanic marketing company UNO
Branding, whose clients have included Target and Best Buy Co Inc <BBY.N>, said
several small clients across different cities had posted declining sales since
Trump took office, and that this had to be affecting big-box retailers, too.
"It's very common to have a Mexican married to an American, but if that Mexican
is undocumented, he's really afraid of going out and looking for work," Fitch
said. "And if only one person is working, obviously their budget is cut in half
and that's a problem if they were going to buy a house or car this year."
On average, Hispanics are younger than non-Hispanics, have more children, and
spend more on each child, according to Jeff Humphreys, director of economic
forecasting at the Terry College of Business. Humphreys also said Hispanics tend
to spend more on apparel, making their buying choices crucial to many retailers.
As the slowdown has mainly hit discretionary spending, retailers that deal in
apparel and footwear — two sectors already feeling pressure - are hurting the
NPD said makers of athletic wear popular with Hispanics, including Nike Inc,
Skechers USA Inc and Vans, would take a big hit.
"It's certainly a good litmus test of how the holiday season is going to shake
out," NPD analyst Marshal Cohen said, pointing to a double-digit decline in
back-to-school footwear sales, compared with a double-digit increase last year.
"That's how powerful certain segments are, certainly the Hispanic market."
Nielsen said sales of consumer essentials to Hispanics rose only 0.6 percent in
the year ended July 1, compared with a 2.9 percent increase the prior year, and
a 6.2 percent in the year before that.
Some restaurants and food companies have remarked on signs that the worst is
over for them.
"The Trump effect just on Hispanic foot traffic into the convenience store seems
to have also dropped off a little bit," Rodney Sacks, chief executive of Monster
Beverage Corp <MNST.O>, told analysts on an earnings call earlier this month.
(Additional reporting by Rodrigo Campos; Editing by Matthew Lewis)
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